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Rebound in M&A Deal to Aid Citizens Financial's (CFG) Q2 Earnings
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Citizens Financial Group (CFG - Free Report) is scheduled to report second-quarter 2024 results on Jul 17, before the opening bell. The company is expected to have witnessed a year-over-year decline in quarterly revenues and earnings.
In the first quarter of 2024, CFG’s earnings missed the Zacks Consensus Estimate on lower net interest income (NII), a rise in provisions and operating expenses. However, an increase in non-interest income and lower allowance for credit losses offered some support.
The company’s earnings missed the Zacks Consensus Estimate in each of the trailing four quarters, the negative surprise being 18.07%, on average.
Citizens Financial Group, Inc. Price and EPS Surprise
Loans: A stabilizing macroeconomic backdrop, along with the expectations of the Federal Reserve easing interest rates later this year, is likely to have offered some support to the lending scenario in the second quarter. The demand for overall loans, especially commercial and industrial loans, improved from the first quarter of 2024 end, per the Federal Reserve’s latest data.
This is likely to have driven CFG’s lending activities, thereby improving the average interest-earning assets balance. The Zacks Consensus Estimate for average interest-earning assets is pegged at $199 billion, indicating a marginal decline from the prior quarter’s reported figure. We estimate the metric to be $200 billion.
NII: As the Federal Reserve kept the interest rates steady during the quarter at a 23-year high of 5.25-5.5%, CFG is less likely to have recorded significant improvement in NII. Also, the inverted yield curve in the June-ended quarter and high funding costs are expected to have weighed on NII growth.
Management expects NII to be down 2% from $1.44 billion in the first quarter of 2024.
The Zacks Consensus Estimate for NII is pegged at $1.42 billion, indicating a 1.9% decrease from the prior quarter. Our estimate is in line with the Zacks Consensus Estimate.
Fee Income: In the second quarter, the mortgage rates declined from the peak of more than 8% but remained considerably high at almost 7%. Though the central bank has signaled a 25-basis point cut in rates this year, the demand for mortgages did not witness significant improvement. Due to the home price appreciation and lower supply, mortgage origination volume remained weak too.
Yet, supported by lower mortgage rates, there is the likelihood of a modest rise in refinancing activities. Also, with the borrowers accepting the fact that interest rates will remain high for a longer period, it is likely to have provided support to CFG’s mortgage banking income.
The Zacks Consensus Estimate for mortgage banking fees is pegged at $57.1 million, indicating a 16.5% rise from the prior quarter’s reported figure. Our estimate of $62.2 million indicates an increase of 26.9% sequentially.
Decent client activity backed by robust equity market performance is likely to have boosted the company’s trust and investment services fees. The consensus for trust and investment services fees is pegged at $70 million, indicating a 2.9% increase from the prior quarter’s reported figure. Our estimate is in line with the Zacks Consensus Estimate.
Merger and acquisition (M&A) activities are likely to have witnessed a rebound in the second quarter, with total M&A deal value rising from the prior year. Also, green shoots were observed in the capital markets and issuance activities. Further, the IPO market activity was decent, given the impressive equity market performance. The Zacks Consensus Estimate for capital market fees is pegged at $117.3 million, indicating a year-over-year surge of 43%. We estimate the metric to be $93.5 million.
Citizens Financial’s efforts to enhance deposit balances on the back of past strategic acquisitions are likely to have aided service charge and fee revenues in the quarter under review. The Zacks Consensus Estimate for the same is pegged at $99.3 million, indicating a rise of 3.4% from the prior quarter’s reported level. Our estimate for the metric is pegged at $107.7million.
Although consumer spending was decent in the quarter backed by a stabilizing macroeconomic environment, the Zacks Consensus Estimate for card fees is pegged at $86 million, indicating a sequential marginal decline. We estimate the metric to reach $82.1 million.
Management expects non-interest income to be up approximately 3-4%. Further, the consensus estimate is pegged at $534.9 million, suggesting a 3.5% sequential increase. Our estimate for the metric is pegged at $534 million.
Expenses: Citizens Financial’s expenses are expected to have flared up on the opening of private banking offices, franchise expansion, as well as investments in newer technological advancements.
Management projects adjusted non-interest expenses to be relatively stable to slightly down sequentially.
Asset Quality: The company is expected to have set aside substantial money for potential bad loans, given the expectations of an economic slowdown.
The Zacks Consensus Estimate for non-accrual loans is pegged at $1.45 billion, indicating a marginal decrease from the prior quarter's reported figure. Our estimate for the metric is pegged at $1.35 billion.
Earnings Whispers
Our proven model predicts an earnings beat for Citizen Financial this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. That is the case here, as you can see below.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Citizens Financial has an Earnings ESP of +1.75%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
The Zacks Consensus Estimate for second-quarter earnings has been revised upward by 1.3% to 79 cents per share over the past month. This suggests a 14.1% decrease from a year ago. The consensus estimate for quarterly revenues of $1.95 billion indicates a 6.7% decline from the prior-year quarter.
The consensus estimate for full-year 2024 earnings is pegged at $3.16, declining 2.5% over the past 90 days. However, it indicates a rise of nearly 1% from the prior year. Nonetheless, the consensus estimates for annual revenues of $7.89 billion indicate a 4.1% fall from the prior-year quarter.
Other Stocks to Consider
Here are some other bank stocks that you may want to consider, as our model shows that these, too, have the right combination of elements to post an earnings beat this time around.
Over the past seven days, the Zacks Consensus Estimate for JPM’s quarterly earnings has moved marginally upward.
M&T Bank Corporation (MTB - Free Report) has an Earnings ESP of +0.31% and carries a Zacks Rank #3 at present. It is scheduled to release second-quarter 2014 earnings on Jul 18.
MTB’s quarterly earnings estimates have moved marginally downward over the past seven days.
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Rebound in M&A Deal to Aid Citizens Financial's (CFG) Q2 Earnings
Citizens Financial Group (CFG - Free Report) is scheduled to report second-quarter 2024 results on Jul 17, before the opening bell. The company is expected to have witnessed a year-over-year decline in quarterly revenues and earnings.
In the first quarter of 2024, CFG’s earnings missed the Zacks Consensus Estimate on lower net interest income (NII), a rise in provisions and operating expenses. However, an increase in non-interest income and lower allowance for credit losses offered some support.
The company’s earnings missed the Zacks Consensus Estimate in each of the trailing four quarters, the negative surprise being 18.07%, on average.
Citizens Financial Group, Inc. Price and EPS Surprise
Citizens Financial Group, Inc. price-eps-surprise | Citizens Financial Group, Inc. Quote
Key Factors & Estimates for Q2
Loans: A stabilizing macroeconomic backdrop, along with the expectations of the Federal Reserve easing interest rates later this year, is likely to have offered some support to the lending scenario in the second quarter. The demand for overall loans, especially commercial and industrial loans, improved from the first quarter of 2024 end, per the Federal Reserve’s latest data.
This is likely to have driven CFG’s lending activities, thereby improving the average interest-earning assets balance. The Zacks Consensus Estimate for average interest-earning assets is pegged at $199 billion, indicating a marginal decline from the prior quarter’s reported figure. We estimate the metric to be $200 billion.
NII: As the Federal Reserve kept the interest rates steady during the quarter at a 23-year high of 5.25-5.5%, CFG is less likely to have recorded significant improvement in NII. Also, the inverted yield curve in the June-ended quarter and high funding costs are expected to have weighed on NII growth.
Management expects NII to be down 2% from $1.44 billion in the first quarter of 2024.
The Zacks Consensus Estimate for NII is pegged at $1.42 billion, indicating a 1.9% decrease from the prior quarter. Our estimate is in line with the Zacks Consensus Estimate.
Fee Income: In the second quarter, the mortgage rates declined from the peak of more than 8% but remained considerably high at almost 7%. Though the central bank has signaled a 25-basis point cut in rates this year, the demand for mortgages did not witness significant improvement. Due to the home price appreciation and lower supply, mortgage origination volume remained weak too.
Yet, supported by lower mortgage rates, there is the likelihood of a modest rise in refinancing activities. Also, with the borrowers accepting the fact that interest rates will remain high for a longer period, it is likely to have provided support to CFG’s mortgage banking income.
The Zacks Consensus Estimate for mortgage banking fees is pegged at $57.1 million, indicating a 16.5% rise from the prior quarter’s reported figure. Our estimate of $62.2 million indicates an increase of 26.9% sequentially.
Decent client activity backed by robust equity market performance is likely to have boosted the company’s trust and investment services fees. The consensus for trust and investment services fees is pegged at $70 million, indicating a 2.9% increase from the prior quarter’s reported figure. Our estimate is in line with the Zacks Consensus Estimate.
Merger and acquisition (M&A) activities are likely to have witnessed a rebound in the second quarter, with total M&A deal value rising from the prior year. Also, green shoots were observed in the capital markets and issuance activities. Further, the IPO market activity was decent, given the impressive equity market performance. The Zacks Consensus Estimate for capital market fees is pegged at $117.3 million, indicating a year-over-year surge of 43%. We estimate the metric to be $93.5 million.
Citizens Financial’s efforts to enhance deposit balances on the back of past strategic acquisitions are likely to have aided service charge and fee revenues in the quarter under review. The Zacks Consensus Estimate for the same is pegged at $99.3 million, indicating a rise of 3.4% from the prior quarter’s reported level. Our estimate for the metric is pegged at $107.7million.
Although consumer spending was decent in the quarter backed by a stabilizing macroeconomic environment, the Zacks Consensus Estimate for card fees is pegged at $86 million, indicating a sequential marginal decline. We estimate the metric to reach $82.1 million.
Management expects non-interest income to be up approximately 3-4%. Further, the consensus estimate is pegged at $534.9 million, suggesting a 3.5% sequential increase. Our estimate for the metric is pegged at $534 million.
Expenses: Citizens Financial’s expenses are expected to have flared up on the opening of private banking offices, franchise expansion, as well as investments in newer technological advancements.
Management projects adjusted non-interest expenses to be relatively stable to slightly down sequentially.
Asset Quality: The company is expected to have set aside substantial money for potential bad loans, given the expectations of an economic slowdown.
The Zacks Consensus Estimate for non-accrual loans is pegged at $1.45 billion, indicating a marginal decrease from the prior quarter's reported figure. Our estimate for the metric is pegged at $1.35 billion.
Earnings Whispers
Our proven model predicts an earnings beat for Citizen Financial this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. That is the case here, as you can see below.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Citizens Financial has an Earnings ESP of +1.75%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
The Zacks Consensus Estimate for second-quarter earnings has been revised upward by 1.3% to 79 cents per share over the past month. This suggests a 14.1% decrease from a year ago. The consensus estimate for quarterly revenues of $1.95 billion indicates a 6.7% decline from the prior-year quarter.
The consensus estimate for full-year 2024 earnings is pegged at $3.16, declining 2.5% over the past 90 days. However, it indicates a rise of nearly 1% from the prior year. Nonetheless, the consensus estimates for annual revenues of $7.89 billion indicate a 4.1% fall from the prior-year quarter.
Other Stocks to Consider
Here are some other bank stocks that you may want to consider, as our model shows that these, too, have the right combination of elements to post an earnings beat this time around.
The Earnings ESP for JPMorgan Chase & Co. (JPM - Free Report) is +0.57% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2024 results on Jul 12. You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the past seven days, the Zacks Consensus Estimate for JPM’s quarterly earnings has moved marginally upward.
M&T Bank Corporation (MTB - Free Report) has an Earnings ESP of +0.31% and carries a Zacks Rank #3 at present. It is scheduled to release second-quarter 2014 earnings on Jul 18.
MTB’s quarterly earnings estimates have moved marginally downward over the past seven days.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.