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Citizens (CFG) Closes Buyout of 80 HSBC East Coast Branches

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Citizens Financial Group, Inc. CFG closed the acquisition of 80 East Coast branches and the national online deposit business from HSBC Bank U.S.A., N.A. on Feb 18. The acquisition, which was announced in May, expands Citizens Financial’s physical footprint in numerous strategic markets, including New York, and adds more than 800,000 customer accounts.

These 80 branches include 66 locations in the New York City Metro area, five locations in Southeast Florida and nine locations in the Mid-Atlantic/Washington DC area. The newly-acquired branches have been re-branded as “Citizens.”

The buyout is in line with the company’s efforts to strengthen its banking franchise in targeted markets. In fact, in July 2021, the company also announced a definitive agreement to acquire Investors Bancorp ISBC in a bid to strengthen its banking franchise and boost the consumer customer base. This deal will mark Citizens Financial’s entry into the New Jersey market and position it at the seventh place by deposits. Post the deal completion, the acquisition will add $21.7 billion in loans, $20 billion in deposits and a network of 154 branches in New Jersey, New York City and Philadelphia metro.

Management noted, “Combined with our pending acquisition of Investors Bancorp, these new branches will fill an important gap in our retail footprint while giving us a top-10 deposit ranking in the key New York City Metro market.”

The acquisition of Investors Bancorp, combined with HSBC branches, creates a strong franchise in the greater New York City and Philadelphia Metro areas, and New Jersey by adding 234 branches. Apart from this, the move is expected to add $29 billion of deposits and $24 billion of loans, creating a strong foundation for revenue growth. Also, the deals combined are expected to be 5% accretive to earnings per share in 2022.

The acquisition of HSBC’s national online deposit business also advances Citizens Financial’s national expansion strategy. This offers an attractive opportunity for CFG’s growing national consumer digital bank, Citizens Access, which is an integral part of its growth.

Hence, the buyout fortifies Citizens' Financial geographic footprint, adds liquidity to the balance sheet and facilitates the bank to expand its national digital banking platform.

Management noted, “We are pleased to welcome more than 500 talented HSBC colleagues to the Citizens family and look forward to additional hiring in areas such as wealth, mortgage, and business banking as we continue to build out our platform and position the bank for further growth.”

While such moves are strategic fits for long-term growth, costs related to additional hiring and integration of these buyouts might increase the expense base, thereby limiting bottom-line growth.

Over the past six months, shares of CFG have rallied 22.1% compared with 10.7% growth of the industry.

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CFG currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inorganic Growth Efforts by Other Firms

Several companies from the finance sector are undertaking buyout efforts to improve competencies in adjacent businesses, strengthen franchise and increase scale in new geographies or within their existing footprint to rise out flaring technology, compliance costs and low interest rates.

Last week, Webster Financial Corporation WBS inked a definitive agreement to acquire Bend Financial, Inc., a cloud-based health savings accounts (“HSA") solution provider.

The buyout will help HSA Bank, a division of Webster Bank, to leverage Bend Financial's client-facing experience that utilizes cloud-native technology and user-centered design. This will offer a modern and simplified approach to HSA management and engagement.

In early February, Truist Financial Corporation’s TFC subsidiary, Truist Insurance Holdings, Inc., inked an agreement to acquire Kensington Vanguard National Land Services.

Over the years, Truist Financial has been strengthening its real estate services through strategic acquisitions. The transaction is expected to aid Truist Insurance in expanding its business in title insurance. The existing title operation of Trist Insurance is BridgeTrust Title, which will likely be integrated with Kensington Vanguard.


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Webster Financial Corporation (WBS) : Free Stock Analysis Report

Investors Bancorp, Inc. (ISBC) : Free Stock Analysis Report

Citizens Financial Group, Inc. (CFG) : Free Stock Analysis Report

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