Deutsche Bank Downgrades Citizens Financial Group (CFG) to Hold
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Deutsche Bank downgraded Citizens Financial Group (NYSE: CFG) from Buy to Hold.
Analyst Matt O-Connor said, "CFG has been delivering on its strategy to boost below average returns by growing revenues, generating positive operating leverage and deploying excess capital. 3Q16’s ROTCE was 8.5% vs. 6.4% in 2015 and a core level of about 5% back in 2013. This also comes at a time when peer returns are declining on average. However, CFG shares now trade at a very slight (1-2%) premium on our 2017e to its peer group, despite returns still meaningfully below peers (by 300bps in 3Q and we estimate 180bps lower in 2017). Given this, upside to the stock seems increasingly dependent on the macro factors noted above for BAC (though CFG has more leverage to rising rates and less to capital markets). Our $27 TP assumes CFG trades in line with our target group multiple of ~13.5x our 2017E. Our target group multiple assumes large regional banks trade at ~75% of the S&P, in line with historical levels. Downside risks are low rates, and execution risks related to building out certain products, and general economic weakness."
Shares of Citizens Financial Group closed at $27.35 yesterday.
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