Citizens Financial Group, Inc. CFG is benefiting from rising loans and deposit balances, along with its efforts to improve its wealth management offerings. Additionally, strategic initiatives like Tapping Our Potential ("TOP") will further support its financials. Yet, a rising cost base is likely to limit its bottom-line growth, and limited diversification in its loan portfolio presents an additional concern.

Key Growth Drivers for CFG Stock

Organic Growth: Organic growth is Citizens Financial’s key strength, as reflected by its rising revenue trend. The company’s total revenues witnessed a CAGR of 3% over the past four years (2020-2024). Though net interest income (NII) recorded a CAGR of 5.3% during the same time frame, non-interest income witnessed a negative CAGR of 1.8%. Nonetheless, an increasing strength in fee-based business should support non-interest income growth in the upcoming period. Given its BSO plan, decent loan growth and the Fed’s rate cut, NII is likely to increase in the upcoming period.

Efforts to Improve Wealth Management Unit:  CFG’s long-term strategy involves growth in wealth management offerings, improved capabilities in the high-net-worth segment and expansion into key markets. The company has opportunistically built out the private bank, which has raised $7 billion of deposits through 2024 and as expected, became profitable in the fourth quarter. Citizens Financial also continues to make solid progress in building out its New York City metro franchise. The company is investing in its payments platform and solidifying commercial middle market coverage with investments in key expansion markets that complement private banking business success.

Healthy Loans and Deposit Base:  CFG exhibits a healthy loan and deposit base. The loans and leases, and deposits recorded a CAGR of 3.1% and 4.4%, respectively, over the past four years (2020–2024). The bank has been enhancing its deposit base by advancing its deposit-gathering capabilities. Management believes that its focus on relationship-based lending and attractive risk-adjusted returns will support loan pipelines.

Strategic Efficiency Initiatives: Citizens Financial’s focus on executing a series of revenue and efficiency initiatives led to the introduction of the TOP program in late 2014.  The first three TOP programs helped achieve a $215 million income benefit. Following this, the Top 4 program and Top 5 program delivered pre-tax benefits of $115 million and $125 million, respectively. The TOP 6 program achieved $425 million in pre-tax run-rate benefits in 2021, while the TOP 7 and TOP 8 programs achieved around $115 million each in pre-tax run-rate benefits in 2022 and 2023.

The company launched its TOP 9 program and achieved a pre-tax exit run rate benefit of $150 million in 2024. Its TOP 9 program is progressing well, and it plans to launch the TOP 10 program, targeting a $100 million pre-tax run-rate benefit by year-end 2025.

Challenges for CFG Stock

Mounting Expenses: Escalating expenses are the key headwind for CFG. The company’s non-interest expenses witnessed a CAGR of 18.4% over the past four years (2020-2024). Though management is making efforts to control expenses and generate positive operating leverage, costs are likely to remain elevated due to the opening of private banking offices, nationwide franchise expansion and investments in newer technological advancements.

Commercial Loan Concentration: The loan portfolio of Citizens Financial contains a high amount of commercial loans (50.1% of total loans and leases as of Dec. 31, 2024). The current rapidly changing macroeconomic backdrop may put some strain on commercial lending. Moreover, in case of any economic downturn, the credit quality of the loan category may deteriorate. Thus, the lack of loan portfolio diversification is likely to hurt the company’s financials if the economic situation worsens.

CFG’s Price Performance and Zacks Rank

Over the past six months, shares of this Zacks Rank #3 (Hold) company have rallied 6.2%, outperforming the industry's 3.5% growth.

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Bank Stocks Worth a Look

Some better-ranked bank stocks are BancFirst Corporation BANF and Cullen/Frost Bankers, Inc. CFR.

BANF’s earnings estimates for 2025 have been revised upward to $6.30 per share in the past 60 days. The company’s shares have gained 34.4% over the past year. At present, BANF carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CFR’s 2025 earnings estimates have been revised upward to $8.867 per share in the past 60 days. The stock has gained 21.6% over the past year. Currently, CFR also carries a Zacks Rank #2.
 

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