Rhode Island-based Citizens Financial (CFG) is among America’s oldest and largest financial services providers. It had $185.1 billion in assets at the end of June 2021. The company is in the process of adding more assets and expanding its operations through acquisitions expected to close in the coming months.
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Let’s take a look at Citizens’ latest financial performance, acquisitions, and risk factors.
Citizens’ Q2 Financial Results
The company generated revenue of $1.61 billion in the second quarter, compared to revenue of $1.75 billion in the same quarter last year. It posted EPS of $1.44 compared to $0.53 a year ago and above the consensus estimate of $1.09. (See Citizens stock charts on TipRanks).
Citizens to Acquire Investors Bancorp and HSBC Branches
This July, Citizens has entered into an agreement to purchase Investors Bancorp (ISBC) in a cash and stock deal valued at about $3.5 billion. Key Investors Bancorp’s executives are expected to join Citizens to ensure business and client continuity. The transaction is expected to close in Q1 or Q2 of 2022.
Previously, Citizens had agreed to acquire 80 bank branches in the East Coast from HSBC. Furthermore, Citizens will take over HSBC’s national online deposit business. The HSBC deal is expected to boost Citizens’ portfolio by about $9.0 billion in deposits and $2.2 billion in loans. The transaction is expected to close in the Q1 of 2022.
Citizens’ Risk Factors
The new TipRanks Risk Factors tool reveals 40 risk factors for Citizens. Since December 2020, the company has revised its risk profile to introduce five new risk factors related to the recently announced acquisitions.
A newly added risk factor under the Legal and Regulatory category tells investors that Citizens requires the approval of various regulators to allow it to complete the acquisitions of Investors and HSBC branches. However, the approvals may come with restrictions that could reduce the benefits that Citizens expects from the acquisitions.
Most of the newly added risk factors fall under the Finance and Corporate category. For example, Citizens cautions investors that its stock price and financial results may be adversely impacted if it fails to close the acquisitions of Investors and HSBC branches. It mentions that it will incur certain expenses in areas such as accounting and administrative fees regardless of whether it complete the deals or not.
Another Financial and Corporate risk factor warns that shareholder lawsuits relating to the acquisitions could result in Citizens taking on additional costs and delay the closing of the deals. That, in turn, might negatively affect the company’s operations and financial condition.
Finance and Corporate is Citizens’ top risk category, accounting for 48% of the total risks. That is below the sector average at 60%. Citizens’ shares have gained about 17% since the beginning of 2021.
Analysts’ Take
In the beginning of the month, Robert W. Baird analyst David George reiterated a Buy rating on Citizens stock with a price target of $47. George’s price target suggests 12.23% upside potential.
Consensus among analysts is a Strong Buy based on 8 Buys and 2 Holds. The average Citizens price target of $52.22 implies 24.69% upside potential to current levels.
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