Financial services provider Citizens Financial Group (CFG) has agreed to acquire Investors Bancorp (ISBC) in a stock and cash deal worth $3.5 billion. The transaction, which is subject to necessary approvals, is expected to close in the first or second quarter of 2022.
With this deal, Citizens will be able to expand its reach to middle-market/small business and consumer customer base, while making a larger physical presence with the addition of 154 branches in the greater New York City and Philadelphia metropolitan areas and across New Jersey.
Citizens expects the deal to be immediately accretive to earnings on account of substantial synergies. It expects the acquisition to add about 6.4% to fully-diluted EPS in 2023. Also, it seeks to achieve $130 million of fully-phased in annual cost savings, after provision for adding investments in brand marketing and technology capabilities.
As per the terms of the deal, Investors’ shareholders will own nearly 14% of the combined company. Also, key members of Investors’ management team are expected to join Citizens, ensuring business and client continuity. (See Citizens stock charts on TipRanks)
The chairman and chief executive officer of Citizens, Bruce Van Saun, said, “The acquisition of Investors, following on the heels of the acquisition of HSBC’s East Coast branches, further strengthens our formidable franchise in the northeast, together adding roughly one million customers and boosting our near and long-term growth potential.”
On July 21, Bank of America Securities analyst Ebrahim Poonawala reiterated a Buy rating and $52 price target on Citizens. The price target implies 17.3% upside potential.
The analyst is of the opinion that loan growth momentum is building in the second half of 2021. He added, “Coupled with further reductions in deposit costs, faster growth in consumer loans is expected to drive net interest income (NII) higher near term. For 2H21, we forecast NII to avg. $1.45bn per qtr. or 2% higher vs. 1H21 reported levels.”
The rest of the Street is optimistic about the stock with a Strong Buy consensus based on 10 Buys and 2 Holds. The average Citizens price target of $52.27 implies 17.9% upside potential.
Furthermore, Citizens scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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