Citizens Financial Downgraded On Valuation At KBW

In a report published Friday, Keefe, Bruyette & Woods analyst Brian Klock downgraded the rating on Citizens Financial Group, Inc. CFG from Outperform to Market Perform, with maintaining the $28 price target. There is less than 1 percent upside to the stock. The stock has significantly outperformed the BKX Total Return Index since November 2014. Year-to-date, the stock has outperformed the BKX Total Return Index by more than 8.9 percent. The stock would become attractive only if there is a meaningful pullback in its valuation or if there were drivers that could boost the earnings. A stronger-than-expected loan pipeline and growth, along with acceleration in expected returns from the cost cutting initiatives could help drive earnings growth. Earnings could also receive a boost if the Federal Reserve increased rates more aggressively than anticipated. "We like management's progress toward achieving its cost save goals, as well as investments in revenue generators/technology that should help drive growth. While CFG is more asset sensitive than its peers, we like the fact that it has levers to pull to grow earnings even if rates do not rise," Klock said. The company's shares are currently trading at a discount to its large regional bank peers, although the gap has narrowed significantly since November 2014.