Citizens Bank’s acquisition of Cleveland-based Charter One Financial Inc. earlier
this month marked a milestone for Citizens by making it the seventh-largest
U.S. bank by assets and deposits. When Citizens was bought by its parent company,
Royal Bank of Scotland plc in 1988, it was ranked the seventh-largest bank in
Rhode Island.
Lawrence K. Fish, chairman and CEO of Providence-based Citizens Financial Group Inc., the bank’s holding company, said it has no immediate plans to become No. 6 in the country.
“Honestly, I haven’t thought about more acquisitions yet,” said Fish. “Our first order of business is to do this (acquisition), and to do it well.”
Beyond Cash Donations: How New Forms of Giving Are Transforming Not-for-Profit Accounting
Evolving Funding Landscape for Not-for-Profits Not-for-profit organizations are being asked to do more with less,…
Learn More
Citizens, which for the most part has control over its own growth strategy, agreed to acquire Charter One on May 4 for $10.5 billion in an agreement that Fish said was about three times book value.
Upon regulatory approval, which is expected in the fourth quarter, Citizens will have total assets of $128.8 billion and more than 1,400 branches in 13 states. Currently, Citizens has assets of about $78 billion and Charter One has just less than $41 million.
Citizens increased its assets by about 50 percent through the deal and expanded its footprint into six new states – Ohio, Michigan, New York, Illinois, Vermont and Indiana.
Fish said he’ll wait nine to 12 months to concentrate on transitioning Charter One locations before making any other acquisitions and expects Citizens’ banking philosophy to remain the same despite its size.
“We may be larger, but we are going to try our best to behave locally, nicely,” he said.
James Ackor, an analyst for RBC Capital who follows Charter One, said moving into another region of the United States does provide opportunity for growth. The Midwest has about one-third of the banking market and two-thirds of the population of banks in the country.
“There are hundreds of small banks there and the acquisition opportunity is quite pronounced,” he said. “I think this is the unsung beauty of this deal since New England has gone through a tremendous amount of consolidation.”
Fish said in a news conference announcing the acquisition that the deal was about Charter One and Citizens coming together as a strategy to capture more revenue.
He said at the conference that the most immediate growth would likely be organic as Citizens extends branch locations into supermarkets. Charter One has experienced similar growth and already has branches at 80 Wal-Marts in its region.
“Philosophically, we are very similar banks,” Fish said.
Fred Goodwin, CEO of the Royal Bank of Scotland, told Bloomberg News recently that there are lots “of acquisitions (in the United States) still to make.” This includes what Goodwin describes as “a couple of thousand” attractive takeover targets.
In a research report by Merrill Lynch, Citizens’s growth is discussed in terms of its strategic value and ability to acquire more banks.
“By increasing the number of U.S. states in which acquisitions are available, (Citizens) has greater tactical flexibility in targeting purchases,” the report says.
It adds that by becoming a top 10 holding company in the United States, Citizens Financial Group is in a better position for what it describes as the “end game” in consolidation here. This is a reference to an active acquisition atmosphere in which the large banks are getting larger with wider national reach.
Royal Bank of Scotland has pegged future revenue growth on its exploits in the U.S. banking market, particularly as growth in Europe is mostly stagnant, according to analysts.
Although the job picture is often negative after an acquisition, the Charter One deal will likely benefit Providence, said Fish.
Fish said there are no immediate plans to add jobs at the Providence headquarters, but as the company has grown, so to has the number of employees. When the Royal Bank first acquired Citizens, there were 1,000 employees in Providence. That number has grown to 5,000 since that time.
