- Wedbush analyst David Chiaverini downgraded Citizens Financial Group ( NYSE: CFG ) on Tuesday to Neutral from Outperform due to the company's high exposure to consumer lending and the increased risks of a recession.
- With the Federal Reserve ratcheting up interest rates to slow the economy and ease inflationary pressures, the unemployment rate could rise, he said.
- "Given the historical correlation between higher unemployment and deteriorating consumer credit quality, we believe CFG could be at higher risk for increased net charge-offs in a weaker environment," Chiaverini wrote in a note to clients.
- He also expects that Citizens Financial ( CFG ) may need to increase its loan loss reserve, which was at 1.27% in the most recent quarter, by a greater amount than its peers during an economic downturn. By contrast the regional bank peer median loan loss reserve was 1.46% in Q3 2022.
- Overall, banks are in the green in Tuesday trading. Citizens ( CFG ) stock gained 1.1% early in the session.
- The Neutral rating aligned with the SA Quant rating of Hold , and broke from the average Wall Street rating of Buy.
- See why SA contributor Seeking Profits in October called CFG's shares "extremely compelling."
For further details see:
Citizens Financial cut to Neutral at Wedbush as recession risk rises