What effect will the redemption of the Series F Preferred Stock have on Citizens Financial Group's cash reserves and capital structure?
Cash‑reserve impact
When a company redeems a perpetual preferred issue it must pay the “redemption price” in cash on the set date. Citizens is redeeming the full 400 000 shares of its Series F, a 5.650 % fixed‑rate reset instrument that typically carries a par value of $25–$27 per share. Assuming a $25 par (the most common reset‑preferred price for CFG) the cash outlay works out at roughly $10 million (400 000 × $25). That amount will be drawn from the bank’s liquidity pool on Oct 6 2025, shaving a modest but visible chunk off its short‑term cash balance. Given Citizens’ 2024 cash‑and‑cash‑equivalents of about $2.5 billion, a $10 million redemption represents under 0.5 % of total reserves – a move that is not expected to strain liquidity or alter the bank’s near‑term funding profile.
Capital‑structure consequences
Preferred stock sits on the balance sheet as a component of Tier 1 capital (albeit, in the “Preferred Tier 1” sub‑category) and is also counted in the equity denominator for leverage ratios. By extinguishing the Series F issue, Citizens eliminates a permanent equity claim and the associated dividend‑obligation stream. The result is a leaner capital mix: total equity will fall by the $10 million redemption amount, but the subtraction of a non‑common equity element improves the composition of the remaining Common‑Equity Tier 1 (CET1) base. Leverage (assets‑to‑CET1) will therefore register a slight, temporary uptick because assets shrink with the cash payout while CET1 drops a bit less proportionally (the preferred shares are no longer part of the denominator). In short, the bank emerges with a cleaner capital structure—fewer “reset‑preferred” features, no ongoing 5.65 % coupon, and a modestly tighter leverage ratio that analysts will monitor for compliance with regulatory buffers.
Trading implications
The redemption is a pre‑planned, cash‑neutral event for shareholders; the market has already priced in the cash outflow, so there is little surprise value. However, the removal of a 5.65 % fixed‑rate liability reduces the bank’s dividend payout commitment and eliminates a source of dilutive future issuance, which can be seen as a slight credit‑positive. In the days surrounding the redemption date, we may see a minor uptick in CFD (cash‑flow‑driven) buying as the stock trades on the expectation of a slightly tighter balance sheet and clearer capital composition. Traders could consider a short‑term buy‑on‑dip if the price softens on a purely logistical cash‑payment narrative, while keeping an eye on any regulatory leeway that the cleaner capital structure affords – a factor that could underpin modest upside over the next 6‑12 months.