The US’s best bank 2021: Citizens
In a market of more than 5,000 banks, competition in the US is fierce. But among the clutch of sizeable regional banks, one firm has seen a remarkable transition since its IPO in 2014, under the steady leadership of chief executive Bruce Van Saun. Citizens wins the award for the US’s best bank.
It was testament to the progress the bank had made since cutting free from parent RBS seven years ago that it entered the pandemic year in fine shape, with a particular focus on investing in its digital capabilities, as well as responding to emerging trends such as point-of-sale finance.
And while provisioning soared as the pandemic hit – over the whole of 2020 the bank took some $1.6 billion of provisions compared with just $393 million in 2019 – its strategy was not knocked off its stride.
Revenues in the consumer bank rose 13% in the 12 months of the awards period and 15% in the commercial bank. Group revenues are now up 40% from 2017. Capital markets and M&A advisory fees, while still just under a third of the size of the bank’s mortgage business, its biggest area, were up 40% in the awards period.
That was a record – helped by the earlier smart acquisitions of M&A boutiques like Western Reserve Partners in Cleveland, Bowstring Advisors in Atlanta and Trinity Capital in Los Angeles – as was the bank’s performance in mortgage banking and wealth management.
Pre-provision profitability is also building well. The consumer bank was up 31% in the period, while commercial banking rose 26%.
“In the consumer bank we moved very aggressively to a digital-first business model, launching a new mobile platform and ramping up our digital sales capacity,” says Van Saun.
That digital approach takes many forms, including the development of its accessOptima platform for cash management. The bank used to outsource much of its work in digital but has hired 250 engineers into its own ranks, giving it an in-house ability to develop more quickly and flexibly.
In retail, households using its mobile offerings increased 15% over the year to the end of March 2021. It has a national digital bank, Citizens Access, a franchise that underpins the bank’s broader expansion strategy and which had more than $5.5 billion of deposits at the end of the period.
Point-of-sale finance, rebranded in 2021 as Citizens Pay, has been a key focus over the past year, and Citizens has expanded this to more sectors, such as health and fitness, home improvements and education. As of January 2021, the bank had originated nearly $6.5 billion in loans, which it retains rather than securitizes, ensuring that it can keep hold of the customer experience.
Van Saun reckons this is a differentiator for the bank and a good example of how Citizens places an emphasis on marrying technology with service.
“We have gained a lot of momentum with Citizens Pay, gaining marquee wins like Apple and Microsoft, and we are well positioned to grow over the next few years,” he explains.
We have been able to attract people from the megabanks and fintechs because of our forward-leaning agenda
Compared with the bulge bracket banks, Citizens is a small fish in investment banking. But it is increasingly seeing the benefits of a targeted approach, as well as its focus on making its different franchises more closely aligned.
Van Saun cites one situation during the awards period that illustrates this well. “When Lacerta put itself up for sale, we had the sell-side M&A mandate but we have a base of sponsor clients that are always looking for ways to put money to work,” he says. “We talked to possible strategic acquirers and sponsors, and when SK Capital ended up buying the company they asked us to be the lead on the buy-side financing. Not only that, but the seller was able to walk across the street and give us the proceeds to manage.”
Van Saun is not done with acquisitions yet and the solid foundations of the bank mean he has the luxury of being able to consider these from a position of strength.
“The fee events that we are achieving now are much more significant than in the old days,” he says. “And we have said that you can expect us to look hard at whether we can add boutiques in areas where we think there will be the most activity. The key is to find a well-positioned firm that has a culture that will work with us.”
That Citizens is in good enough fettle to continue its development was demonstrated by its bold move to acquire some 80 branches from HSBC in May 2021 as the UK bank exits US retail banking, in a deal that brought some $9 billion of deposits, of which about one third are online.
Van Saun reckons it adds up to a powerful mix and one that means the bank is increasingly able to punch above its weight – not least when it comes to hiring talent from elsewhere.
“We have been very pleased that there is a buzz about Citizens, with its customer-focused approach and a collaboration culture – there is not a lot of bureaucracy or politics here,” he says. “We have been able to attract people from the megabanks and fintechs because of our forward-leaning agenda.”
It also helps that the bank is increasingly active in its work to foster sustainability and corporate responsibility. Its organizational health index score rose again, placing it now in the top quartile for the first time. In its pandemic support for small business it deployed about $5 billion in Paycheck Protection Program loans.
In the area of social equality it made a $10 million commitment to drive advancement in underserved communities, with grants and economic opportunity funds for minority-owned businesses, as well as ramping up diversity in its own ranks, with an 18% year-on-year increase in candidate diversity.