On Tuesday, Citi maintained its Buy rating on shares of Citizens Financial Group (NYSE:CFG) and raised the stock price target to $39.00 from $36.00. The adjustment follows a review of the company's regulatory filings and an update to the bank's interest rates forecast.
Citi predicts a rise in net interest income (NII) for Citizens Financial starting in 2025, as existing swaps expire and fixed assets are repriced.
The firm's stance is based on the expectation that credit concerns are less significant this cycle, due to a perceived absence of excess credit creation. Despite a reduction in the earnings per share (EPS) estimates for the years ahead, Citi sees a promising risk/reward profile for the bank.
The 2024 EPS forecast has been revised down by 10 cents to $3.10, contrasting with a higher FactSet consensus of $3.24. Similarly, the 2025 EPS estimate has been lowered by 5 cents to $4.30, compared to the FactSet consensus of $4.04, and the 2026 EPS forecast is down by 10 cents to $5.25.
Citizens Financial Group is currently trading at what Citi describes as the widest discount compared to its peers, based on the implied cost of equity metric. The bank's shares are trading at a 14% discount versus the 11.4% average for its peers.
In light of these factors, Citi believes that Citizens Financial presents significant value for investors and has reiterated its Buy rating while raising the price target. This new stock target reflects a lower cost of equity assumption.
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