We have recently unveiled our selection of the 11 Best Regional Bank Dividend Stocks to Consider. In this discussion, we will explore the positioning of Citizens Financial Group, Inc. (NYSE:CFG) relative to other top regional bank dividend stocks.
The year 2024 proved to be highly profitable for major US banks, with the largest six institutions collectively experiencing a 20% rise in net profits compared to the prior year, as reported by FactSet. This performance marks one of the most fruitful periods for the US banking industry in the last 20 years. The sector made a significant recovery following the widely covered bank failures of 2023, which saw several leading lenders collapse. Estimates from the Financial Times indicate that trading revenue for the year increased to $123 billion, representing a 10% gain from 2023, while investment banking fees soared by 34% to $36 billion, driven by an uptick in deal-making activity later in the year as companies resumed equity and debt offerings.
Regional banks have been regaining traction within the banking landscape in the aftermath of the regional banking crisis in spring 2023, which forced lenders to prioritize liquidity, frequently at any expense. While their performance has exceeded that of the Russell small cap index, it still fell short of the overall market’s impressive full-year return of over 25.02%. Despite these gains in 2024, bank stocks have lagged behind the broader market across several years, presenting an enticing investment opportunity at historically low valuations. By the end of the year, the price-to-earnings (P/E) multiples for the Regional Banking Index and Community Bank Index were nearly half that of the overall market, illustrating their relative bargain status.
Moreover, in the fourth quarter of 2024, about two-thirds of US regional banks reported enhanced earnings compared to the previous year. As per S&P Global Market Intelligence, 35 out of 51 banks with assets ranging from $10 billion to $100 billion showed year-over-year growth in earnings per share (EPS) for the fourth quarter, based on financial disclosures made between January 13 and January 24. Additionally, 27 regional banks posted quarter-over-quarter improvements, while 22 experienced EPS growth in both quarterly and annual perspectives. Conversely, only 11 regional banks saw EPS declines in both comparisons.
A report by S&P Global Ratings indicated that net income in the fourth quarter improved due to lessening pressures on net interest margins (NIM) and an increase in fee income. For the complete year of 2024, net income benefited from lowered provisions and stable fee income; however, NIM compression partially countered these gains. Regional banks enjoyed another consecutive rise in net interest income (NII) during the quarter, aided by modest loan growth and enhanced NIM. Nonetheless, for the year overall, NII remained under pressure.
The report further stated that in the fourth quarter, the median NIM rose by 5 basis points to 3.14%, as declining deposit costs outweighed the effects of lower loan yields and asset repricing. The firm foresees a gradual increase in earnings for 2025, bolstered by the potential for higher NIMs and a slow recovery in loan growth.
The banking sector continues to be a favorite among investors, ranking among the top two sectors for dividend distributions. An S&P Global report estimated that banks globally distribute around $380 billion in dividends. In light of this, we will examine some of the top dividend stocks from the regional banking sector.
Is Citizens Financial Group, Inc. (CFG) the Prime Regional Bank Dividend Stock to Consider?
A financial advisor assessing a client’s portfolio in a contemporary office environment.
For this article, we utilized a Yahoo Finance screener to pinpoint regional banking firms. From this list, we selected 11 stocks with the highest number of hedge fund investors, based on Insider Monkey’s Q4 2024 database. The stocks are arranged in ascending order according to hedge funds’ sentiment toward them.
What draws our interest in the stocks favored by hedge funds? The reason is straightforward: our research indicates that mirroring the top stock choices of the leading hedge funds can lead to market outperformance. Our quarterly newsletter’s approach selects 14 small-cap and large-cap stocks each quarter, achieving a return of 373.4% since May 2014, outperforming its benchmark by 218 percentage points (see more details here).
Number of Hedge Fund Holders: 43
Citizens Financial Group, Inc. (NYSE:CFG) is a bank holding company based in Rhode Island. As one of the larger regional banks, it serves the northeastern US with an extensive network of over 1,000 retail branches across 14 states and total assets exceeding $217 billion. Although its operating expenses are higher than those of exclusively online banks, the company has consistently demonstrated strong lending capabilities, adeptly managing risk and achieving solid returns. Furthermore, it has shown operational resilience, establishing itself as a dependable entity within the regional banking domain.
In the fourth quarter of 2024, Citizens Financial Group, Inc. (NYSE:CFG) generated $1.986 billion in revenue, a slight decline of 0.1% from the same timeframe last year. However, this revenue exceeded analysts’ predictions by $26.79 million. The company’s net income reached $401 million, a remarkable increase from $189 million in the same quarter last year. The Private Bank concluded the year with $7 billion in deposits, $3.1 billion in loans, and $4.7 billion in assets under management, demonstrating significant progress toward its established goals.
Citizens Financial Group, Inc. (NYSE:CFG) maintained a robust balance sheet with a CET1 ratio of 10.8% as of December 2024, compared to 10.6% the previous year. Thanks to this cash position, the company remained committed to its shareholder obligations, returning $188 million to shareholders through dividends in the latest quarter. Currently, it provides a quarterly dividend of $0.42 per share, with a dividend yield of 4.64%, as of April 3.
In summary, CFG holds the 8th position on our list of the top dividend stocks within the regional banking sector. While we acknowledge CFG’s potential as an investment, we believe that certain deeply undervalued dividend stocks present stronger prospects for delivering higher returns in a shorter time frame. If you’re on the lookout for a highly undervalued dividend stock with more promising potential than CFG, which trades at 10 times its earnings and grows earnings at double-digit rates annually, explore our report on the dirt cheap dividend stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article was originally published by Insider Monkey.
The request from the Department of Homeland Security marks an intensification in President Trump’s battle against Harvard, the nation’s oldest and wealthiest university.
