NEW YORK (TheStreet) -- Citizens Financial's (CFG - Get Report)  initial public offering last week hit at a lower-than-expected price range of $21.50 -- so don't look for many banks to rush to market to raise large cash amounts via IPO any time soon. The banking industry's regulation will need to be settled first and revenues will need to recover.

On the surface the offering seems modestly successful, with a closing stock price of $23.25 on Friday, or an 8.1% return over the first three days of trading. The IPO raised over $3 billion dollars for its parent company, the Royal Bank of Scotland (RBS) , which still owns 71.5% of Citizens, which is now valued at about $13 billion. But Citizens' share price has barely crossed over the lower end of the original pricing range of $23 to $25.

Obviously the investment bank underwriters of this stock knew it was overpriced given the financial metrics of the bank. So the underwriters reduced the offering price by 6.5% from the lower end of the range. This was a far cry from the tech stock IPO of Alibaba (BABA - Get Report) , which began trading Sept. 19 with an initial stock return of 38% on its first day of trading.

As the table above shows, had Citizens' stock been offered at its initial estimated stock price, returns would have been mostly negative -- with just a 1% return at the lower end offering price of $23. Additionally, the bank is an underperformer in profitability and net interest margin (spread between interest on loans and interest paid to depositors) compared to other banks.

Based on the current price and 560 million total shares outstanding, a forecasted $1.65 in earnings per share for 2014 would produce a target price of $24.76. That's a 6.5% return to investors over the next four to five months. However, with a $750 million share buyback promised by management for 2015 and 2016, the 12-month target share price could jump to $26.50 under current assumptions.

Compare Citizens' modest return with that of Synchrony Financial (SYF - Get Report) , another large financial spinoff earlier in the summer. Synchrony has produced a 7.7% return over its first two months of trading since its debut July 31.

The appetite for financial stocks in tepid at best.

Another contributing factor to the lukewarm demand could be the mixed recovery results of the banking sector. While industry assets are at an all-time high of $15.2 trillion, the number of banks has dropped over 56% since 1990 to a 25-year low of just 6,656 institutions. With fewer assets concentrated in ever fewer banks and mergers at a five-year low, banks are becoming bigger. The number of new banks formed also is at a 25-year low. More regulatory barriers and competition from non-traditional banks with little financial regulation makes it very tough for new banks to enter the market.

On the positive side, banking net profits are at an all-time high of over $40 billion. However, according to the FDIC Quarterly Report, industry revenues have fallen for four straight quarters in a row. Cost-cutting and loan loss provision reductions due to improved loan quality have primarily driven the profitability. This is not sustainable without increased revenue generation going forward, as evidenced by the lowest net interest margin -- 3.15% -- since the third quarter of 1989.

Another bright spot is that the number of problem banks is the lowest (354, as identified by the FIDC) since the financial crisis. There have been only 12 bank failures this year, through September -- also a 6 year low.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.