Why Citizens Financial Group Is Acquiring 80 Branches From HSBC
Citizens Financial Group (NYSE: CFG) recently announced it plans to purchase 80 branches from the U.S. division of HSBC as the London-based bank looks to exit U.S. retail banking and focus more on wealthy clients. Citizens is getting 66 branches in the New York City area, nine in the mid-Atlantic and Washington, D.C., area, and five in southeast Florida. The deal comes with $9 billion in deposits and $2.2 billion in loans, mostly residential mortgages. Let's take a look at why Citizens chose to pull the trigger on this deal.
There are several reasons this deal makes sense for Citizens. Citizens expects the deal to immediately boost earnings per share upon closing and result in an internal rate of return of 20% with no cost savings or revenue synergies baked in. The branch acquisition also fills in an important gap in the $187-billion-asset bank's geographic footprint: New York City. While the bank does have 111 branches in New York, most of them are upstate and not around the city, so this certainly fills in a missing piece. Also, I expect the bank will find opportunities to consolidate or close branches, which will eventually result in cost savings down the line.
Image source: Citizens Financial Group investor presentation.
Source Fool.com
