Earlier in his career, Bruce Van Saun got passed over for an opportunity to be the CEO of a major bank after it merged with another company. It was a disappointing development, but fate would be on his side.
He went to Royal Bank of Scotland (RBS) as a CFO in the late 2000s as the company had taken a recent tumble and needed a new team to bring it back to health. As it turned out, RBS needed to offload some of its assets thanks to a European bailout rule and in 2013, the company decided to divest Citizens Bank, a super-regional bank it owned with a major presence in the northeast U.S.
Van Saun, who was living in the U.K. at the time, got a chance to move back to America and run a major bank. The board told him, “We think you’ve got the credentials to go lead Citizens and take it public and tell the story to investors and turn around the fortunes of the bank.”
That was in 2013. In 2014, he led Citizens to a successful IPO in the U.S. In 2015, he oversaw the company’s transition from an RBS subsidiary to a fully independent enterprise. Since then, it’s been an uphill climb for the bank as it transitions from a super-regional bank to one that competes with the big boys (aka the Chase Manhattan and Bank of Americas of the world). The bank’s annual Organizational Health Index (OHI) score has risen dramatically from 58 (2014) to 68 (2017), nearing the top quartile.
Chief Executive spoke to Van Saun, Citizen’s chairman and CEO, about the company’s continued evolution, its investments into technology, whether he is predicting a recession to come and leveraging the bank’s competitive advantage over smaller and bigger rivals. Below are excerpts from this interview.
Talk to me about the evolution since spinning out from RBS and the IPO.
I’d say, Citizens had a good foundation, so there was good raw material to work with. But given the stresses on the parent company, this created pressures on Citizens as well. There was a lack of capital to invest and we were quite a bit behind in terms of technology, risk management, any kind of functional areas, the HR practices, and the business model around having fee-based capability. There was a lot of work to do around investing in the business.
And the other big thing is that because RBS needed capital, the balance sheet shrunk fairly dramatically. So, really, job one was trying to figure out where we could grow to get leverage back into the balance sheet and get back to the scale to be profitable. At the same time, we were looking at the zero-base of expenses and extracting inefficient use of expense dollars so we could self-fund the catch-up technology and all these functions and go out play offense and hire some really good talent, customer-facing talent.
So, we benchmarked ourselves very carefully against peers. We knew what the gaps were. The first order of business, really, was get the plan and have the board endorse the plan and then go get the people to actually execute the plan. And so over time, I’d say when I first got here, we had a 12-person executive committee, counting me, so I had 11 people reporting to me. Today, I’ve got nine new people out of those 11. I’ve got two holdovers. And I joke with those two that, “Don’t worry, you’re safe. You’ve been here long enough.”
But, you know, you have to go about that in a way where people who were here, maybe had hit their ceiling. You want them to leave of their choosing, with dignity and just give them a good send-off. So, I didn’t make any changes before the IPO. We had a script to get to the IPO within a year, and then we started to let people retire or peel off to do other things.
And I brought in a very experienced team, most of whom had worked in the mega banks, a number of whom at JPMorgan. So, really, some big bank experience that were enthusiastic about the opportunity to make an impact and shape a bank, where to a large extent, it was a white canvas. We were given the keys to the car from RBS. Usually, banks get sold, they don’t get IPOed. And so effectively, RBS was the best thing [because] the bank and the management team had control of the agenda.
I think that was pretty exciting and pretty attractive for folks to peel out of some of the bigger banks and come here and be a big player in shaping this and putting it on a journey to becoming a great bank, a top performing bank.
What have been some initiatives that Citizens Bank has undertaken to spur its growth?
I’d say on the business side, our commercial bank always was good. But it was not fully at scale, so it needed to be bigger. And we didn’t have all the product capabilities. So really, the first order of business was to go out and figure out where we could expand, where we could bring in coverage bankers.
We had a bias towards the middle market, which are slightly smaller companies, and we thought we had a good opportunity to move up market into the mid-corporate space, but still not going head-to-head every day with the mega banks. But there was a $500 million to $3 billion in revenues, that’s the mid-corporate space, and if we were going to attack that, we needed to bring in bankers with industry expertise. So, we had to build out some industry verticals.