It has been trying to become a top performing national Bank. It has made some genuine efforts over the previous five years to enhance its underlying business, as well as diversify its revenue and offer some meaningful distinction from its competition. The effort appears to be paying off. Citizens Financial Group is very well positioned this year for various reasons.
1. Increasing income diversification and size.
Citizens Financial Group has taken a number of initiatives in recent years to diversify its loan and fee revenue streams, as well as grow up. To expand its home lending business, it purchased Franklin American Mortgage in 2018. Wealth management, capital markets and investment Banking are all areas where the Bank is expanding. Since 2015, the Bank’s assets under management have increased by more than thrice.
Citizens Financial Group has also been expanding its capital markets through bolt on acquisitions and the business produced $184 million in fee income in the fourth quarter of 2021, up over $100 million from the fourth quarter of 2020. That pace will be tough to maintain but it demonstrates their commitment to market leadership.
2. Rising interest rates will be very beneficial to it.
When the Federal Reserve raises its benchmark overnight lending rate (the federal funds rate), most Banks gain since their loan yields tend to reprice higher than their actual deposit rates.
Citizens Financial Group on the other hand, is more asset sensitive than the typical Bank. At the end of the third quarter of 2021 they disclosed that if the federal funds rate were to rise by one percentage point overnight, its net interest income, the money it makes on loans and securities after covering the cost of funding those assets, would increase by about 11% over the next year. Although this is improbable because the Fed would most likely hike the federal funds rate in quarter percentage point increments, it nevertheless demonstrates the Bank’s extraordinary asset sensitivity. With Citizens Financial Group forecasting some decent loan growth this year, it should speak well for the Bank’s lending business and accompanying income.
3. Establishing the national digital consumer Bank
Their main point of distinction is the construction of a national digital consumer Bank. Mortgages, home equity loans, student loans, car loans and Citizens Pay’s buy now, pay later (BNPL) program are among the many consumer lending products they offer.
Citizens Pay is a revolving credit line that customers can use several times after they’ve been accepted. They may use it to buy things for no money up front and then pay it off over time with absolutely no interest charges at all.
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