Citizens Financial downgraded at JPMorgan

JPMorgan downgraded Citizens Financial Group (NYSE:) to Neutral from Overweight and cut its price target to $27 from $29, citing concerns about the bank’s capital requirements and profitability levels.

The recent 2023 DFAST results showed that all banks in JPMorgan’s coverage had capital in excess of minimum requirements, but Citizens is expected to face increased capital requirements, leading to pressure on profitability.

According to the firm, Citizens has a lower cushion relative to peers above minimum CET1 requirements based on 3/31 levels and has continued to buy back stock in Q2.

The bank also faces challenges from high losses on commercial real estate (CRE) loans due to the high level of maturities of office CRE loans in 2023 and 2024. Citizens recently increased its outlook for Q2 NCOs to the 40ish bp range. The bank’s increase in capital erosion in DFAST ‘23 was driven by increased loan loss provisions.