Citizens chief eyes revenue boost, no ‘broad layoffs’

Van Saun
Van Saun

As chairman and CEO of RBS Citizens Financial Group since Oct. 1, Bruce Van Saun has the eyes of the international financial community on him, with industry analysts studying his statements and actions for clues as he prepares for the bank’s announced 25 percent IPO, now targeted for the fourth quarter of 2014.
Van Saun arrives in the United States after four years in the United Kingdom helping the Royal Bank of Scotland dig out of a near collapse, the resulting $71 billion government bailout and political pressure to return taxpayer money.
With 5,400 RBS Citizens employees in Rhode Island, Van Saun – a man the British newspaper The Telegraph labeled “a heavyweight American banker” – will be watched carefully by the region as well.

PBN: Since you moved into your new position as CEO of RBS Citizens, based in Providence, what’s been your first order of business?
VAN SAUN: I’ve been spending a lot of time with our colleagues and customers, talking to them about what we’re doing really well and also what areas we have opportunities to do better in. The first thing I want to do is to ensure that we’re making progress toward becoming a top-performing regional bank. The key to that is going to be our relationship with our customers. I think you win in banking if you’re offering a distinctive and differentiated customer proposition. … Citizens’ culture, historically, has been focused on the three Cs – customers, colleagues and community. So I think we have a good base to build on. But it’s clearly very competitive out there, and I want to do an assessment of that. Beyond that, we’re also obviously focused on this plan toward an IPO and making sure I understand where we have some performance issues and gaps.

PBN: What’s the target date for the IPO?
VAN SAUN: We’re looking at Q1 of 2015 as the initial date, but recently I’ve been saying in some of my public remarks that I think we can bring that forward to Q4 of ’14. So we’re currently building our plan toward that – the fourth quarter of 2014.

PBN: Since the British government bailed out the parent company, the Royal Bank of Scotland, with $71 billion in 2008, there’s been reported political pressure from elected officials in the U.K. to get the bank to return taxpayers’ money. How does this pressure affect RBS’ commitment to Citizens Bank?
VAN SAUN: I think the IPO is somewhat of a response there. It’s a decent-size holding for RBS to own Citizens Bank, in terms of allocated capital. I think the plan that we announced to take roughly 25 percent of Citizens public does help to generate some value and provide some liquidity for the asset. On the broader question of the political pressure, RBS has been a huge rescue effort, and it’s taken a fair amount of time to get the bank back to good health. One of the things I’m proud about, having been over there, is that we have the bank safe and sound again. But it’s still going to take some time before the government will be able to divest itself of that stake. It’s a very big stake, and I think that stock will be sold down over a number of years. We can do our part by improving the performance of Citizens, taking it public and getting some value for the asset. I think that will be good for RBS. From Citizens’ standpoint, it’s also quite good. The public listing has numerous positives for us. There’s an increase in our brand visibility. In terms of attracting and retaining talent, to have our own stock, our own currency, is a positive. Eventually, it creates some opportunities for us in terms of using that currency down the road.

PBN: There has been speculation that you will have to cut costs to make Citizens attractive to investors and that could include layoffs. Are layoffs planned for Citizens Bank in Rhode Island? What are your plans related to expenses?
VAN SAUN: There are no plans, at this point, for any broad layoffs. One of the things you have to look at in assessing Citizens’ financial position, you do certain peer benchmarking of different ratios and our expenses-to-total assets, or expenses-to-deposit, ratios are pretty much in the pack. One of the other measures people look at is the cost-to-income ratio, where it looks like our expenses are high. But that’s more a result of starting with an income deficit.
When I look at the broad financial equation, we have to generate more revenue. We have to put more earning assets on the books. My initial plans are to go out and make some investments in people, in originators in the mortgage business, for example; in business banking, where we see a very attractive opportunity, and wealth advisers; and then in some of our corporate-loan industry groups. I think there are opportunities to deepen those groups and extend them nationally from being relatively focused on the in-footprint opportunities. We want to invest. We want to add some people.

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PBN: Where would some of those additional employees be?
VAN SAUN: We have a 12-state footprint and so you’d be putting people in various locations. The mortgage originators and business bankers and wealth advisers would be on the consumer side. We have a big presence in Rhode Island in terms of the number of branches and market share we have … so certainly some of those folks would be net adds to the overall employment picture [in Rhode Island].

PBN: You said at some point you’d do an overview and trim? How long into the future do you see that happening?
VAN SAUN: I think you want to get on with those programs relatively quickly. So with the IPO, if you put the IPO out in the fourth quarter of ’14, we want to gear up fairly quickly. Some of these hiring plans are already in process, so we want to give those more impetus. Surveying the rest of where we’re invested and what our people are doing is something you’d like to get to the bottom of relatively quickly, in a matter of months, if you’re going to make any changes to help fund those areas of increase.

PBN: Does that mean there are expected to be some layoffs after you get into this hiring?
VAN SAUN: Some of those people could just be redeployed.

PBN: You have taken on some pretty big challenges over the course of your career. You helped stabilize RBS and you also played a significant role in the merger of Bank of New York and Mellon Bank. How do you compare your new assignment to those jobs?
VAN SAUN: Citizens, I think, is a franchise with great potential, but it hasn’t consistently delivered on that potential up to now, so we’re making progress. I see that the challenge here really is to drive it to the next level and accelerate some of that progress, take the company public and then keep onwards toward becoming a top-performing regional bank. So if you look for things in life to do that are worthwhile, important and challenging, this would kind of fall in line with some of the things I’ve done previously in my career.

PBN: You have said publicly since your arrival that you see opportunities to grow revenue by expanding some parts of the bank. What are your strategies to increase your share of specific segments of the market?
VAN SAUN: You look at what we have on the consumer side, we have an attractive footprint, which we’ll maybe do a little fine-tuning on, but fundamentally, it’s an attractive footprint. I think what we need to do to win is to serve our customers better and distinctively compared to peers. We’ve poured a huge amount of investment into that. We’ve invested in technology and product capabilities probably $900 million or a billion [dollars] over the last four years. So that should start to manifest itself, in terms of just a better customer experience, which will hopefully drive more cross-sells, so we’ll be doing more for our customers and adding more business, winning market share from some of the people we compete against. In terms of the different asset classes, we have an opportunity to reshape the balance sheet that comes out of those consumer interactions. We’d like to continue to expand the auto-finance business, the education finance business. In mortgages, we’ve been kind of punching under our weight, so we want to add more mortgage originators and then we want to retain more of the mortgages that we originate on our balance sheet, as opposed to selling them off in the secondary market. So there’s a fairly comprehensive strategy to just increase the size and effectiveness of the consumer bank. On the corporate side, we’ve actually built out, I think, a very strong overall business there, from kind of a smaller position, relative to consumer, it’s come on quite strong over the last four or five years. … We think we can take that nationally. We’ve limited ourselves up to now to focusing on what the footprint has been, but once you have that expertise you can broaden who you can cover effectively.
We’ve built out a capital-markets business that didn’t even exist in ’09. … In 2013, we’ll be a top 10 regional bank provider in the capital-markets space.

PBN: You played a significant role in helping RBS, one of the world’s largest banks, turn around after the financial crisis. What do you think are lessons learned from that experience, overall, in the industry?
VAN SAUN: With respect to capital liquidity and funding structures, overall governance, strength of risk management, [all] that failed in the last crisis and a lot of the regulatory effort … has really focused on strengthening the banks’ balance sheets and those governance and risk processes. We’ve made a huge amount of progress there. … The second thing is that there needed to be more focus on customers and culture in the banks. That’s the next wave of the regulatory focus – really pushing things to put the customers at the center of what they do and change their cultures, change their remuneration systems. Had that been in place also, we would have avoided some of the activities that got the bank into trouble when the crisis hit.

PBN: Are you going to be based in Providence at the headquarters for RBS Citizens?
VAN SAUN: Looking where I’ve been to-date and at my plans for the fourth quarter, I’ll probably be spending two-to-three days between Providence and Boston combined. Part of my time will be in Stamford, Conn., because I’m also head of RBS Americas and we have our markets business there that I have to oversee, as well. I’ll be out and about in our franchises. I’ll be in Pittsburgh, for example. I think I’ll be living out of a suitcase for some time. I think there will be a lot of hotel time in my near future.

PBN: Will you be living in Rhode Island?
VAN SAUN: My house is in New Jersey. I’m a ninth-generation Van Saun in New Jersey and that’s not an easy thing to overturn.

PBN: So you’ll still be living in New Jersey?
VAN SAUN: Yes, I kept my house when I went over to London, and we’re just going to move back into the house.

PBN: Do you think you’ll have time to be involved in the community in Rhode Island?
VAN SAUN: Absolutely. Staying around, even if you’re in hotels, you’ve got to get to know the leaders of the city, the key people in the business community, some of the great community work that takes place. I also hear Providence has some great restaurants up on Federal Hill. I expect to be visible. •

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