When talking about any bank, it’s important to remember that current bank sector valuations are far below normal and sentiment is lousy, as investors worry about the impact of the confluence of tight spreads, weak loan demand, rising credit costs, and limited expense leverage. Given all that, it may well not be until late next year before banks start trading on recovery prospects.
Even so, I continue to believe that Citizens Financial (CFG) is just too cheap at a double-digit discount to book value, particularly in the context of upside potential from balance sheet optimization, better operating leverage, and growth in fee-generating businesses. With annualized total return potential in the double digits, I believe this is a name worth considering, and I don’t see much risk to the dividend unless there’s a significant deterioration in the economy beyond what’s already expected.
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Citizens Financial's Discount Is Shrinking, But It's Still Too Wide Relative To The Opportunity
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