Citizens Financial (NYSE: CFG) Stock Jumps 7.3% in Debut; Industry Concerns Loom

Citizens Financial Group Inc. (NYSE: CFG) stock closed its first day of trading today (Wednesday) at $23.08, a 7.3% gain from its offer price of $21.50.

Citizens Financial had initially set a price range of $23 to $26 for its IPO price, so the $21.50 offer price was a disappointment for early investors. Still, the 140 million shares sold made CFG the second largest IPO of 2014 by raising $3 billion.

Previously, the second biggest IPO of the year was the $2.88 billion deal that Synchrony Financial (NYSE: SYF) held in July. Both banking IPOs rank behind last week's Alibaba IPO, which raised $25 billion and stands as the largest IPO of all time.

CFG stock

More than 60 million shares exchanged hands on CFG's first day on the New York Stock Exchange.

In the company's IPO filing, Citizen's announced that it had $2.6 billion in revenue for the six months of 2014 ending in June. In the same time period, CFG had a net profit of $479 million.

Citizens Financial is the U.S. banking arm of the The Royal Bank of Scotland Group (NYSE: RBS), which is a British bank that's mostly owned by the U.K. government. CFG is headquartered in Providence, R.I., and operates 1,200 branches throughout the Northeast and Midwest. CFG is the 13th-largest retail bank in the United States, with more than 5 million customers and more than $130 billion in assets.

"We are making steady progress toward our goal of becoming a top-tier regional bank that delivers a great banking experience for our customers and additional value for all of our stakeholders," Citizens Chief Executive Officer Bruce Van Saun said today.

Through the IPO, RBS is reducing its ownership in Citizens from 100% to 75%. Company officials have said they want to fully exit CFG stock by 2016.

The first-day pop for CFG stock was bigger than other banking IPOs in 2014 have seen. In fact, this has been a rough year for financial IPOs, and that doesn't bode well for CFG stock now...

CFG Stock Joins Crowd of Underperforming Bank Stocks

According to Dealogic, 10 U.S. banks have gone public in 2014 and they've averaged a first-day pop of just 3%. All other IPOs have averaged an opening-day gain of 14%. Furthermore, banking stocks have climbed an average of just 6% from their IPOs, while all other stocks have averaged a gain of 13%.

"It's a tricky time right now for Citizens to go public," Renaissance Capital IPO ETF manager Kathleen Smith told The Wall Street Journal prior to CFG's pricing. "It will need to come to market at an attractive price to entice investors."

That's presumably why CFG priced its shares below the initial price range. And while the lower price is more attractive to would-be buyers, it also casts a shadow over the IPO. Pricing under the range typically denotes that shares weren't as highly demanded as the newly public company had thought they would be.

The biggest financial IPO flop of the year has been Santandar Consumer USA Holdings (NYSE: SC) which has dipped 25% from its offer price.

Synchrony Financial stock has also had an uninspired performance since going public, up just 8% from its offer price. Like CFG, Synchrony didn't raise as much as it planned through its IPO. SYF stock brought in $2.88 billion after projecting an IPO total of $3.1 billion.

According to Federal Deposit Insurance Corp., the overall revenue of the U.S. banking industry in Q2 was $40.2 billion. That was the second-highest total ever for the industry. However, low interest rates and new rules against consumer fees have held financial stocks back.

So far, CFG stock has outdone most of its banking competitors, but the current status of the banking industry won't do the stock any favors in the short term.

NOW: If you already thought our public servants were greedy, dirty, and corrupt, well, this helps prove your case. Here's a look at the Washington-Wall Street "Corruption Corridor"...

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