Citizens Financial Plans to Buy a Mortgage Company for $511M

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With an aim to further expand its mortgage banking business, Citizens Financial Group, Inc.CFG announced a deal to acquire Franklin American Mortgage Company. The all-cash deal has been valued at $511 million.

The deal, expected to close in third-quarter 2018, is still subject to regulatory approval and customary closing conditions.

Franklin, TN- based Franklin American Mortgage is a national mortgage servicing and origination private, nonbank mortgage company. The company manages $41.4 billion mortgage servicing portfolio and has successfully originated about $13.7 billion in mortgages in first-quarter 2018, out of which all are conforming.

On completion of the deal, Citizens Financial expects itself to be positioned among the top-15 bank-owned, originators and servicers. Also, with this acquisition, the company will triple the size of its off-balance sheet mortgage originations that currently stand at $20.2 billion. It will be valued at about $61.6 billion post the acquisition, with a total portfolio of $78.9 billion that includes its on-balance sheet mortgages as well.

As part of the deal, Citizens Financial will be adding roughly 200,000 servicing households, over 600 correspondent relationships and more than 1,000 wholesale-broker relationships. Moreover, conforming originations mix will be increased from the bank's current level of 45% to 85% with around 70% of combined originations to be signified by purchase volume.

Brad Conner, Citizens Financial's vice chairman and head of consumer banking, informed, "This transaction takes our mortgage business to the next level, expanding our reach and adding immediate scale in servicing as well as innovative correspondent and wholesale solutions."

Conner further added, "Franklin American Mortgage's strong history of excellence in customer service is a great cultural fit with our organization and we are excited to welcome a new group of colleagues to Citizens."

Shares of this Zacks Rank #2 (Buy) stock have gained 22.1% in the last 12 months, outperforming 13.6% growth recorded by the industry .

Stocks to Consider

A few other stocks worth-considering from the finance space are Northern Trust Corporation NTRS , Comerica Incorporated CMA and M&T Bank Corporation MTB . All the stocks carry a Zacks Rank of 2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Northern Trust Corporation has witnessed 5.1% upward estimate revision for current-year earnings in the last 60 days. Over the past six months, the company's share price has been up 4%.

Comerica Incorporated's 2018 earnings estimates has been revised 4.9% upward for the last 60 days. Additionally, the stock has jumped 11.5% in six months' time.

M&T Bank Corporation has witnessed upward estimate revision of 2% for the current-year earnings, over the last 60 days. Also, the company's shares have risen 1% in the past six months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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