Saying last week’s sell-off triggered by one bank’s results appears to be overblown, Citi analyst Keith Horowitz on Monday upgraded Citizens Financial Group Inc. to buy from hold.
Citizens Financial Group’s stock
CFG,
+2.82%
rose by 1.4% in premarket trading.
“With the market pricing in greater credit concerns, we are stepping off the sidelines and upgrading CFG,” Horowitz said.
Horowitz kept his target price for the stock at $36 a share, after Citizens Financial Group’s stock dropped by 7% between Jan. 30 and Feb. 2, amid pressure on the entire sector.
A profit miss from New York Community Bancorp
NYCB,
+5.04%
has caused its stock to drop by 42% in the past three trading days and also brought down other regional-bank stocks as well.
New York Community Bancorp’s stock was down by 0.3% in premarket trading.
Also read: Does New York Community Bancorp have another surprise in store for investors?
With the BKW Nasdaq Bank Index
BKX
down about 3% since New York Community Bancorp reported, Citizens Financial Group and M&T Bank
MTB,
+1.34%
have been the biggest underperformers.
Although Citizens Financial Group has office-space exposure in New York and other impacted markets, the bank has increased its reserves for office space and may release reserves in 2024, Horowitz said.
“We believe [this] would be a positive catalyst for the stock,” Horowitz said.
Also read: New York Community Bancorp’s sole traded bond fell off a cliff this week, dragging others down with it
Citizens Financial Group has also faced an earnings drag from interest-rate hedges, but the current interest rate environment will potentially turn that into a tailwind, Horowitz said.
Horowitz also reiterated a buy rating on M&B Bank with the expectation the company’s management will “MTB as we believe mgmt. will “restore confidence in their credit portfolio at the mid quarter update.”
M&T Bank’s stock rose by 1.3% on Friday, but was not trading in the premarket.
Overall, Horowitz said that “investors should be playing offense rather than defense in the current environment” because “recent price action creates attractive entry points.”
Given that most or all of the other large regional banks have reported earnings before New York Community Bancorp, no other major surprises appear to be in the works this week.
Citizens Financial Group ranks as the 13th largest retail bank holding company in the U.S. by assets.
Also read: ‘The small, regional bank business model is unalterably broken,’ says Oppenheimer analyst after New York Community Bancorp stock swoon
Read the full article here