After The Royal Bank of Scotland PLC took a British taxpayer bailout in 2008, rumors circled for years about a possible sale of subsidiary Citizens Financial Group Inc. that could threaten some of the Providence-based bank’s thousands of local jobs and billions of dollars in assets.
Enter Bruce Van Saun. The 59-year-old former RBS finance director joined Citizens as its chairman and CEO in October 2013.
“I’ve done a lot of strategic transactions in my career, so it was a combination of the board having confidence in me and investors viewing me as a proven commodity,” Van Saun told Providence Business News, when asked why RBS chose him to lead Citizens.
He has guided the now-independent financial institution through its separation from RBS and the planning for a 420,000-square-foot campus in Johnston to consolidate more than 3,200 employees in 2018.
While Van Saun is pleased with the bank’s financial trajectory, currently $140.1 billion in assets and approximately 5,300 local employees, he would like to see it become a top-performing financial institution in the country.
To get there, he admits, there’s much to be done, as the bank must learn to live without the support of its former parent, grow its identity as an independent bank and find a way to build a competitive edge in a cutthroat industry.
Could you go back a few years and explain Citizens’ spinoff from its former British parent RBS?
I had been over at RBS as finance director in London for four years, and then I came over to lead Citizens and take it public. We went public on Sept. 24, 2014. We had to separate the company from RBS, which was Citizens’ parent for 25 years, and there was a lot of interconnectedness that we had to figure out how to pull apart. We had to establish all the corporate functions that you need to be a public company, including financial reporting, investor relations, [and] bigger legal and HR requirements. We sold over $12.5 billion in stock and exited RBS completely from the ownership position. That was good for RBS, because they had a mandate, as part of taking state aid from the government bailout, and had to ultimately exit the ownership of Citizens by the end of 2016. That was achieved 14 months ahead of schedule. Now we’re independent and we can call our own shots, and it feels great.
What has becoming independent done for the company’s identity?
I think it’s a big psychological boost, more than anything. The fact that we set out to do it and achieved it was very positive. It’s a franchise that has all the potential to be one of the top-performing banks, but under foreign ownership was marching to a different drummer. We have all the raw materials to turn this into one of the best banks in the country, but there’s a fair amount of work to be done to achieve that.
What went into your plans to build a 420,000-square-foot central campus in Johnston?
We have a couple major leases, the biggest one being our large center in Cranston, where we house 2,600 people, and that lease is coming to an end of term in 2018. So our choices were to renew that lease and put a significant amount of [money] into that building, or we could look for another building that was pre-existing, or – option No. 3 – look for something de novo that we could build to suit. We were quite rigorous in looking at all of those options and looking at quality of life of the employees, if it was going to be somewhere other than Cranston, and then the cost. As a public company, we have to watch the bottom line, and I think the good news is that ultimately we settled on the Johnston site after going through that whole process and in a way that I think gets us the best of everything.
We get an extremely well-situated location, we get a class-A campus and the run-rate of our costs is only modestly ahead of today’s run rate and probably would be a little cheaper than if we stayed in Cranston.
Did you look outside of Rhode Island?
We never shopped it, we never tried to look at other states, or other regions, because we’re very satisfied with the quality of labor force that we have here. We have very passionate and engaged colleagues and that’s hard to replicate, so we are invested in Rhode Island for a long time to come.
What about the Superman Building, can you talk a little bit about what – if any – consideration went into that building?
I’d probably not want to get drawn into the choices that we didn’t take.
I ask because there’s such a high level of public interest in that building.
What you have to understand is the nature of our existing workforce: where they live and what they are used to doing. We have a suburban workforce that goes to work in their cars and is comfortable operating in that fashion. We currently have big operation floors in Cranston, which is really helpful in terms of how we operate and interact with each other. It’s hard to replicate that in any kind of downtown, skyscraper-type building. People like to [ask], ‘Is the Superman a white elephant?’ or, ‘Is there some blemish on the Superman Building?’ And all I would say to that is that any kind of skyscraper building, when you think about the criteria that I just went through, wouldn’t have cut the mustard. And there’s the cost, too. Being out in the suburbs and being able to build the way we want – we’re able to come in at a very attractive price point for getting all that we’re getting.
Are you in any discussions about possibly moving your Providence headquarters elsewhere?
Nope. It’s been headquartered here since 1828 (as High Street Bank), so no plans to change that. I’d like to see our 200th anniversary right here in Providence.
Are you finding the talent pool here is allowing you to grow, or do you have to recruit on a larger scale?
I think mostly there [are] enough people here, but as some of our needs become more sophisticated in an age when knowledge workers are key, we need [more talent] to address some of the things we’re doing. We’re working on the so-called CCAR, or “stress test,” that we have to do every year for capital planning and management. And you have to build extremely sophisticated models and model validators that test and challenge these models, so it requires a huge influx of Ph.D.s to actually do a lot of this work. We couldn’t find all of that here in this market. We found some of it, and we found the rest of it up in Boston, for example.
Are Rhode Island schools producing enough qualified workers?
With some of these higher-skilled jobs, it’s a little bit of a challenge. Those are the kind of jobs, frankly, that Rhode Island wants to keep here, so there’s a great incentive to focus on the education system. I think we initially start connecting at the university level, but then it’s got to go all the way back. If we’re thinking out 10 or 20 years, that’s the elementary, through middle, and high school education system, so Rhode Island has to be competitive with – for example – Massachusetts. If you look at today’s comparators, Massachusetts has quite an edge on Rhode Island, and Rhode Island is certainly aware of that based on some of the current proposals that the governor is making to pattern around some of the constructive change that you’ve seen in Massachusetts. I’m all for that, because I think you have to think both short term and longer term if you’re going to really be competitive.
How successful is the company’s commercial banking?
I think we have a very good mix of business between our consumer bank and our commercial bank. Today the loan book is probably 55 percent consumer and 45 percent commercial. Our commercial business has been growing at a good clip. We have very smart people who show up with value-added ideas and help companies be more successful. It’s a crowded marketplace, there’s a lot of competition, but if you have that edge, which we call “thought leadership,” on the commercial side, that can win you loyalty. If you have relationship orientation and are consistent in helping people through the bad part of the economic cycles and think long term, they stay with you for a long time. I feel like that business has good momentum, good leadership, good talent and that should continue.
How are you dealing with the changing face of consumer banking?
We have a great franchise, but consumer banking is going through massive change in terms of how people want to bank. There’s been an 8 percent reduction in foot traffic each year for the last three years. Fifty percent of folks use the mobile phone in some way to check balances or do some type of mobile banking, so between mobile banking and online banking, you have to keep investing there. But if you have fewer people going into your branches, you need to think about whether you need all the space.
Do you need all the space?
Over the next 10 years, and hopefully a little shorter than that, we’re going to basically redesign all of our branches and take down the space by roughly half. Not reduce the number of branches, but rather the average size. If the average branch size is 4,200 square feet, we probably could run at 1,800-2,000 square feet and be much more efficient in terms of layout. We’ve got our first branch with this new concept here in Rhode Island in Woonsocket. We’ve got two now in Boston, one in Chinatown and one in Cambridge, and this year we’ll have 45 new branches rolled out and then next year we’re stepping it up to 80.
How is the company acclimating to the banking habits of millennials?
They are just much more tech savvy and a little diffident about going into the branch and talking with people. My kids will do everything through the machine and the phone if they can, without ever having to sit down and talk with people, and they’re in their early 20s. I think that changes as people go through a life cycle of having kids and having a family and wanting to put an addition on the house and are thinking about borrowing money. You can’t just always do that online, so as people get older they’re more willing and confident to talk with a specialist. Being a strong, technology-savvy, digitally enabled bank should help us attract and retain [millennials].
How does being technologically savvy open the door to fin-tech?
One of the things that millennials potentially [will] like is robo-advising, this so-called phenomenon where you provide your information, how much you can save and how much you’ve already saved in terms of your assets. It then can build a plan and feed it into the computer and the computer says this is your optimal asset allocation, and this is your optimal saving plan. If millennials don’t like having long chats, or having lunch at the country club with their broker, and can do it all with a point and click, the robo-advising is something that we’re talking to some of these fin-tech companies about, asking, ‘Is there a neat offering that we can just bolt on into our offerings and basically rent that capability and offer it to the millennials?’
A lot of these fin-techs now realize that the banks have the brand and they have the deposit base. They thought they would just cannibalize the big banks because they were asleep at the switch and they didn’t offer a great customer experience, so if they focused on that, they could eat [our] lunch – but not so fast. They don’t have the ability to put a big loan book and finance that on a permanent basis because they don’t have deposits. They don’t have the brand that banks have built up over decades and so they have to spend a lot of money to try and get their name out there. So you kind of say, ‘OK, a lot of them are going to go paws up.’ They’re trying to figure out how to change their game plan and actually view the banks as partners. I think banks are looking at that and saying, ‘If I can improve my capabilities, and I can take something in on a plug-and-play basis, and it doesn’t distract me from the important systems and investments that I’m making, we’ll do it all day long.’
Do you think there’s room for Citizens to get any bigger?
So we’re $140 billion and Citizens has been as high as $170 billion back in the go-go era before the financial meltdown. As part of RBS playing defense and shrinking and running off assets of lower quality, [assets totaled] $120 billion. Since I walked in the door two and a half years ago we’ve grown it from $120 billion back to $140 billion, and I think we can continue to have nice growth in our footprint. I don’t think we’re saturated and I think there’s plenty of organic opportunities just to run the bank better.
What about if you maximize your footprint?
I think geographically there’s some densification of certain regions already in our footprint that we could consider. When I think about the belt from Connecticut through lower upstate New York, northern New Jersey down to eastern Pennsylvania where we’re not as deep as we’d like to be, there are areas like that in a footprint that we could consider. There’s some attractive contiguous markets, particularly south when you look to Virginia and the Carolinas and down to Atlanta, that’s a nice area, and we have some capital markets and commercial real estate people working out of Charlotte. We haven’t gone there from a consumer standpoint, but we see opportunity from a commercial-banking standpoint down there. You just have to be careful that you don’t get out over your skis, and when you enter new markets there’s always the chance you get back adverse selection. If we went out and put on $20 billion in assets, if we went and bought someone that’s moderately sized, there’s nothing really until you get to $250 billion when you hit some of these rules kicking in that have a little bite to them, so there’s some green grass to go run on eventually.
Now that you have led the company through an IPO and its full divestment from RBS, are you committed to staying with Citizens in the long term?
Separation from RBS was a great achievement for Citizens, but we still have a lot of work to do. My focus is on executing our plan and helping Citizens reach its potential as a top-performing, regional bank. •