Citizens Financial Announces New Buyback Plan: Is it Worth Watching?

Core Viewpoint - Citizens Financial Group (CFG) is enhancing its shareholder-focused strategy, demonstrating confidence in its long-term performance through an increased share repurchase authorization of $1.5 billion, up from $300 million previously approved in June 2024 [1][8]. Financial Performance - CFG's quarterly dividend has been increased twice in the last five years, with a current payout ratio of 53% and a dividend yield of 4.15% based on a closing price of $40.45 [2]. - CFG's total revenues experienced a compound annual growth rate (CAGR) of 3% from 2020 to 2024, with net interest income (NII) growing at a CAGR of 5.3% during the same period [12]. - For 2025, management anticipates NII growth of 3-5% and non-interest income growth of 8-10% [14]. Capital Position - As of March 31, 2025, CFG reported total long-term borrowed funds of $12.3 billion and total available liquidity of $12.2 billion, indicating a strong balance sheet [5]. - The Common Equity Tier 1 ratio was 10.6%, and the total capital ratio was 13.9% as of the same date, reflecting a solid capital position [5]. Growth Strategy - CFG is pursuing growth through acquisitions, cost-cutting programs, and private banking expansion, with notable acquisitions including Investors Bancorp and HSBC's East Coast branches [9][8]. - The "Tapping Our Potential" (TOP) program has delivered consistent cost savings, with TOP 9 achieving $150 million in pre-tax run-rate benefits in 2024, and TOP 10 targeting an additional $100 million in savings by year-end 2025 [10]. Loan and Deposit Trends - CFG's loans and leases and total deposits recorded CAGRs of 3.1% and 4.4%, respectively, from 2020 to 2024, with expectations of continued growth through 2027 [11]. - Despite a dip in loan balances in early 2025, management remains optimistic about sustaining a healthy loan pipeline through a relationship-driven lending model [11]. Expense Management - Non-interest expenses have seen a CAGR of 18.4% from 2020 to 2024, with management projecting a 4% increase in adjusted non-interest expenses for 2025 [15]. - The company is facing elevated expense levels due to investments in private banking and digital infrastructure [15]. Market Performance - CFG shares have increased by 16.3% over the past year, outperforming the industry growth of 11.1% [17]. - CFG trades at a forward price-to-earnings (P/E) ratio of 10.76X, slightly above the industry average of 10.1X [20]. Investment Considerations - CFG's ongoing efficiency initiatives and strategic growth moves provide a solid foundation for future financial growth, despite near-term challenges related to elevated expenses and reliance on commercial lending [24].