On Friday, Citi updated its outlook on Citizens Financial Group (NYSE:CFG), increasing the price target to $43 from the previous $39, while maintaining a Buy rating on the company's shares. The adjustment follows the bank's earnings announcement, which saw its shares climb by 1.9%, outperforming the Bank Index (BKX), which rose by 0.7%.
The bank's earnings success was attributed to a core pre-provision net revenue (PPNR) beat, which was driven by better-than-expected expenses and a confirmation of the previously issued guidance.
Management highlighted positive trends in deposit balances and pricing, which are expected to contribute to an upside in the full-year net interest margin (NIM), despite reaffirming net interest income (NII) guidance that considered the impact of softer loan demand.
Citizens Financial Group anticipates NII expansion in the second half of the year, propelled by increased utilization rates. Moreover, strong inflows of private bank deposits could potentially push NII even higher. Management conveyed optimism regarding fee-based income streams, particularly from capital markets, card services, and wealth management, leading to an improved fee outlook.
Credit performance was reported to be consistent, with little concern outside of commercial real estate (CRE), suggesting that losses should be manageable. This supports the expectation that consensus estimates may see an upside. Citi expressed confidence in Citizens Financial Group, naming it a top pick and highlighting the stock's attractive value at current levels, while reiterating its Buy rating and raising the price target.
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