A key question coming out of Citizens Financial’s (CFG) third-quarter results is whether this bank is going through its credit cycle sooner than other banks, or whether it will see a materially worse credit quality cycle. “Sooner, not worse” is a credible argument, but this wasn’t a well-loved bank going into earnings, and without an upgrade to cost-cutting expectations or other near-term sources of improved results, the bears have a little more ammunition in the short term.
I’m still bullish on Citizens Financial. My argument has never been predicated on Citizens Financial being one of the best banks (it’s not), but rather on the bank being better than what’s reflected in the valuation. Citizens still has a strong middle-market lending franchise, opportunities to grow fee-generating businesses, and opportunities to improve operating leverage. With what I believe is a line of sight to double-digit ROTCE even in a near-zero rate environment, I don’t believe that Citizens should trade at a nearly 20% discount to tangible book.
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Weaker Credit Numbers Don't Help The Bullish Citizens Financial Argument
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