Citizens Financial (CFG) Eyes to Enhance Private Credit
Citizens Financial Group, Inc. CFG, capitalizing on the increasing private capital activity, is undertaking discussions with potential sponsors, per a Bloomberg article.
Per a source familiar with the matter, CFG has still not concluded on any agreement or finalized any deal.
The private credit market has shown impressive growth over the years. Per Morgan Stanley’s private credit outlook that quoted Bloomberg as on January 2023, the size of the private credit market in the U.S. was approximately $1.4 trillion, up from $875 billion in 2020. Further, it is projected to reach $2.3 trillion by 2027.
Given the opportunities in this market, major banks like Citigroup Inc. C and JPMorgan Chase & Co. JPM have also been looking for prospective partners as they wish to expand their offerings in the private lending business.
C intends to enter the direct lending space by early January next year. This was reported by Bloomberg. According to a source familiar with the matter, “The initiative would complement the bank’s existing broadly syndicated leveraged finance business”. Citigroup is expected to associate with one or more partners as it would aid in providing the necessary capital for giving loans.
JPM is also on the lookout for a potential partner to enhance its operations in the private credit space. This was first reported by Bloomberg in early November. Per people familiar with the matter, the discussions were at an early stage with various sovereign wealth funds, endowments and alternate asset managers.
Similarly, we expect Citizens Financial to grab the opportunity and enhance its foothold in the lucrative private credit market.
In October 2023, it launched the Citizens Private Bank, enhancing its operations in the wealth management space. It also plans to open six private banking offices during the remaining part of 2023 and throughout 2024.
Apart from the enhancement of banking operations, Citizens Financials’ efficiency initiatives are other positives. The company is in process to launch its “Tapping Our Potential” (TOP) 9 program along with a major cost reduction initiative. The TOP 9 program is expected to focus on simplification of its organization structure and bringing efficiencies in procurement.
Amid the weak macroeconomic conditions, efforts to augment efficiencies and enhance offerings will preserve returns, thereby propelling strong performance over the medium term.
In the past three months, shares of CFG have gained 6.8% compared with the industry’s growth of 1.8%.
CFG currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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