Citizens Financial Group, Inc. Announces Preliminary Stress Capital Buffer and $656 million Increase in Share Repurchase Authorization to $1.25 billion

Rhea-AI Summary

Citizens Financial Group (NYSE: CFG) has announced a preliminary Stress Capital Buffer (SCB) of 4.5%, effective October 1, 2024, following the Federal Reserve's stress test results. The company expects its CET1 ratio for Q2 2024 to be about 160 basis points above the regulatory minimum of 9.0%, showcasing its capital strength. Additionally, the board has increased the common share repurchase program to $1.25 billion, an increase of $656 million. This reflects confidence in the company’s financial performance and commitment to delivering attractive returns to shareholders.

Positive

• Preliminary Stress Capital Buffer of 4.5% significantly above the 9.0% regulatory minimum.
• Q2 2024 CET1 ratio expected to be 160 basis points above the regulatory minimum.
• Share repurchase authorization increased by $656 million to total $1.25 billion, indicating confidence in financial health.

Negative

• Federal Reserve's modeled decline in pre-provision net revenue generation is inconsistent with Citizens' own stress test results, indicating potential concerns about revenue projections.

Insights

Financial Analyst

The announcement of Citizens Financial Group's preliminary Stress Capital Buffer (SCB) and increased share repurchase authorization are significant developments for investors. Stress Capital Buffer is a regulatory requirement ensuring banks have enough capital to withstand severe economic downturns. A 4.5% SCB, effective October 1, 2024, translates to a regulatory minimum Common Equity Tier 1 (CET1) ratio of 9.0%. The CEO’s expectation for the CET1 ratio to be approximately 160 basis points above this minimum signals strong capital adequacy.

The increased share repurchase authorization from $594 million to $1.25 billion represents a decisive move to return capital to shareholders. Share repurchase programs generally reduce the number of outstanding shares, potentially increasing the value of remaining shares and improving key financial ratios like Earnings Per Share (EPS). However, share repurchases must be balanced with the necessity to retain sufficient capital for business operations and organic growth.

Long-term investors should note the company's commitment to maintaining a robust CET1 range of 10.0% to 10.5%. This commitment illustrates prudent financial management and a focus on resiliency. Yet, the potential discrepancy between the Federal Reserve’s stress test results and the company's internal stress tests might indicate a need for investors to scrutinize the assumptions and models used by financial regulators versus those used internally by the company.

Market Research Analyst

The increase in share repurchase authorization is a substantial move that reflects confidence in Citizens Financial Group's financial health and future prospects. Repurchasing shares can be a strong signal to the market that the company believes its stock is undervalued. For investors, this often translates to a favorable view of the company's valuation and prospects.

However, the timing and scale of these repurchases will depend on various factors including market conditions and the company's capital position. Observing how and when Citizens executes this repurchase plan will provide further insights into management's confidence in its operating conditions and financial outlook.

In the short term, these repurchases may provide support to the stock price, potentially leading to price appreciation. Nevertheless, investors should remain vigilant about broader market conditions and other regulatory considerations that might affect the company's ability to carry out its repurchase strategy. Additionally, considering the company’s extensive operational footprint, ongoing economic conditions in the various states it operates will also play a critical role in its performance.

PROVIDENCE, R.I.--(BUSINESS WIRE)-- Citizens Financial Group, Inc. (NYSE: CFG or the “Company”) today announces the Board of Governors of the Federal Reserve System (the “Federal Reserve”) has communicated to the Company its preliminary Stress Capital Buffer (“SCB”) of 4.5%, effective October 1, 2024, following the release of the Federal Reserve’s DFAST stress test results on June 26, 2024.

The Company’s regulatory minimum CET1 ratio implied by the preliminary SCB is 9.0%. Citizens expects its second quarter 2024 CET1 ratio to be approximately 160 basis points above the implied regulatory minimum, reaffirming the capital strength of the Company. This strong capital position permits continued support of customer needs and organic growth initiatives as well as strong ongoing return of capital to shareholders.

The Company also today announced that its board of directors has increased the capacity of the Company’s common share repurchase program to $1.25 billion, an increase of $656 million above the $594 million of capacity remaining as of June 28, 2024 under the prior February 2023 authorization.

“The Federal Reserve’s stress test results illustrate Citizens’ strong capital position, which is well in excess of our regulatory minimum,” said John F. Woods, Vice Chair and Chief Financial Officer. “We note that the Federal Reserve’s stress test results reflect an improvement in their modeled credit losses overall, driven by a reduction in commercial real estate losses, compared with the 2023 stress test. However, the Federal Reserve’s modeled decline in pre-provision net revenue (“PPNR”) generation is inconsistent with our company-run stress test, which reflects meaningfully better PPNR results.”

Woods added, “We are pleased to report that our Board has approved an increase to our share repurchase authorization. The authorization reflects confidence in our ability to deliver strong financial performance while continuing to invest across our businesses and deliver attractive returns to shareholders. We will continue to operate within our targeted CET1 range of 10.0 to 10.5%.”

The Company will assess potential changes to its capital distributions as conditions warrant. Citizens’ common stock repurchases may be executed in the open market or in privately negotiated transactions, including under Rule 10b5-1 plans and accelerated share repurchase and other structured transactions. Common stock dividends are subject to consideration and approval by Citizens’ Board of Directors. The timing and exact amount of common share repurchases and common stock dividends will be subject to various factors, including the company’s capital position, financial performance, capital impacts of strategic initiatives, market conditions and other regulatory considerations.

About Citizens Financial Group, Inc.

Citizens Financial Group, Inc. is one of the nation’s oldest and largest financial institutions, with $220.4 billion in assets as of March 31, 2024. Headquartered in Providence, Rhode Island, Citizens offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations and institutions. Citizens helps its customers reach their potential by listening to them and by understanding their needs in order to offer tailored advice, ideas and solutions. In Consumer Banking, Citizens provides an integrated experience that includes mobile and online banking, a full-service customer contact center and the convenience of approximately 3,300 ATMs and more than 1,000 branches in 14 states and the District of Columbia. Consumer Banking products and services include a full range of banking, lending, savings, wealth management and small business offerings. In Commercial Banking, Citizens offers a broad complement of financial products and solutions, including lending and leasing, deposit and treasury management services, foreign exchange, interest rate and commodity risk management solutions, as well as loan syndication, corporate finance, merger and acquisition, and debt and equity capital markets capabilities. More information is available at www.citizensbank.com or visit us on X, LinkedIn or Facebook.

Forward-Looking Statements

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “goals,” “targets,” “initiatives,” “potentially,” “probably,” “projects,” “prospects,” “outlook,” “guidance” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” and “could.”

Forward-looking statements are based upon the current beliefs and expectations of management, and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:

• Negative economic, business and political conditions, including as a result of the interest rate environment, supply chain disruptions, inflationary pressures and labor shortages, that adversely affect the general economy, housing prices, the job market, consumer confidence and spending habits;
• The general state of the economy and employment, as well as general business and economic conditions, and changes in the competitive environment;
• Our capital and liquidity requirements under regulatory standards and our ability to generate capital and liquidity on favorable terms;
• The effect of changes in our credit ratings on our cost of funding, access to capital markets, ability to market our securities, and overall liquidity position;
• The effect of changes in the level of commercial and consumer deposits on our funding costs and net interest margin;
• Our ability to implement our business strategy and achieve our financial performance goals across our Consumer, Commercial and Private Bank businesses;
• The effects of geopolitical instability, including the wars in Ukraine and the Middle East, on economic and market conditions, inflationary pressures and the interest rate environment, commodity price and foreign exchange rate volatility, and heightened cybersecurity risks;
• Our ability to comply with heightened supervisory requirements and expectations;
• Liabilities and business restrictions resulting from litigation and regulatory investigations;
• The effect of changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale;
• Changes in interest rates and market liquidity, as well as the magnitude of such changes, which may reduce interest margins, impact funding sources and affect the ability to originate and distribute financial products in the primary and secondary markets;
• Financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses;
• Environmental risks, such as physical or transition risks associated with climate change, and social and governance risks, that could adversely affect our reputation, operations, business, and customers;
• A failure in or breach of our compliance with laws, as well as operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber-attacks; and
• Management’s ability to identify and manage these and other risks.

In addition to the above factors, we also caution that the actual amounts and timing of any future common stock dividends or share repurchases will be subject to various factors, including our capital position, financial performance, capital impacts of strategic initiatives, market conditions, and regulatory considerations, as well as any other factors that our Board of Directors deems relevant in making such a determination. Therefore, there can be no assurance that we will repurchase shares from or pay any dividends to holders of our common stock, or as to the amount of any such repurchases or dividends.

More information about factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in the “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as filed with the Securities and Exchange Commission.

CFG-IR

View source version on businesswire.com: https://www.businesswire.com/news/home/20240628008598/en/

Media: Peter Lucht - 781.655.2288

Investors: Kristin Silberberg - 203.900.6854

Source: Citizens Financial Group, Inc.

FAQ

What is Citizens Financial Group's (CFG) Stress Capital Buffer (SCB) for 2024?

The preliminary SCB for Citizens Financial Group is 4.5%, effective October 1, 2024.

How much has Citizens Financial Group increased its share repurchase authorization?

Citizens Financial Group has increased its share repurchase authorization by $656 million, bringing the total to $1.25 billion.

What is Citizens Financial Group's expected CET1 ratio for Q2 2024?

Citizens Financial Group expects its CET1 ratio for Q2 2024 to be approximately 160 basis points above the 9.0% regulatory minimum.

Why did Citizens Financial Group increase its share repurchase program?

Citizens Financial Group increased its share repurchase program to reflect confidence in its ability to deliver strong financial performance and attractive returns to shareholders.

How does the Federal Reserve's stress test impact Citizens Financial Group?

The Federal Reserve's stress test results indicate a strong capital position for Citizens Financial Group, but show a modeled decline in pre-provision net revenue, which differs from the company's own better results.