Investors looking for a cheap stock during this pullback should consider placing their bets on Citizens Financial Group , UBS says. “CFG, where market multiples at 1.2x 1Q22 TBV, 1.0x YE22 TBV, and 7.0x ’23E EPS imply that the stock is the closest to pricing in a recession in our regional universe,” analyst Erika Najarian wrote in a note to clients. “CFG is not a ‘clean’ loan-growth-plus-rising-rates story, and this has been heavily discounted in the stock.” Najarian upgraded the stock to buy from neutral, noting that the regional bank deserves “a little more credit” for the work it has done to transform its deposit base since its IPO. That performance should be in-line with peers, she wrote. “CFG has been given little credit for remaking a subpar franchise into a bank that’s closely comparable to regional peers, as reflected in its persistent valuation discount to peers,” Najarian wrote. “We are now more confident that CFG can hit a cumulative deposit beta of 35% during this rate cycle (in our estimates, and largely in-line with peers) vs 43% (worst among regionals) in the last cycle.” Along with the upgrade, the firm raised its price target to $54, meaning shares could rally 42% from Friday’s close over the next 12 months. Shares of the Citizens Financial have cratered 19.7% this year and are down 3.7% since the beginning of May even as interest rates rise, a phenomenon that would typically help regional banks as they get to charge more for lending. However, recession fears have caused investors to dump financial stocks recently. — CNBC’s Michael Bloom contributed reporting
