Bruce Van Saun Shares Banking-Industry Insights
This is masters in business with Barry Ritholtz on Bloomberg radio this week on the podcast. I have an extra special guest. His name is Bruce Fan so on he is the chairman and CEO of Citizens Financial Group. They are one hundred sixty five billion dollar bank. The twelfth largest largest in the United States if you are at all interested in banking financing middle market private equity just a whole one of different aspects of the financial services world. You'RE GONNA find this conversation to be quite interesting Bruce's really a a very knowledgeable and articulate spokesman on not only behalf of his bank but the banking industry in general. He has a really a good insight as to what's going on in both the industry and the economy. So I found this conversation to be fascinating and I think you will also with no further ado. My interview with Bruce Van Saun. This is masters in business with Barry Ritholtz on Bloomberg radio my special guest this week is Bruce Van Saun. He is the chairman and Chief Executive Officer of Citizens Financial Group They were spun Out From Arby s back in twenty fourteen where then Sawn led a successful initial public offering previously he had been executive -secutive director on the board of for the prior four or five years before that he was vice chairman and CFO at the Bank of New York. Mellon His previous career stints include Deutsche Bank Wasserstein Perella and kidder. Peabody Bruce Van Saun welcome to Bloomberg. Thanks thanks my pleasure to be here. Barry let's start at the bank in New York and Bank of New York Mellon you. Where were you during the financial crisis which what was the name of the time? Well I had Left by then so I joined back in New York in Nineteen ninety-seven biggest crisis. I experienced there was when nine eleven. Hit and we Mickley Out of business there for a few days and we had to scramble to get the bank back on its feet but how you downtown on Wall Street was the headquarters building. Barclays was street. Was the operation center right. And so we were kind of straddling the World Trade Center buildings and when you couldn't have access to downtown We had to work out of other offices that we scrambled to secure and we had to stand up a new data center with. IBM's help and Sterling Sterling forest. So that was exciting period. How long did it take for you guys to get back up and running attack? It was it was a couple of days and then we had a lot of Pressure to basically start moving money and move securities and clear out the backlog that held up for a couple of So you had backup facilities. Just that wasn't so location. It was relatively easy to turn. We didn't have the same kind of resiliency that banks today. So after in the wake of that back in New York went out and built a brand new spanking data center out in Tennessee and so we're constantly ready to flip over but we weren't at that level wlove resiliency at that time. The cloud has changed everything for banks and financial institutions. As part of that so part of it was just making the investment and recognizing the need for a higher level of resiliency but now moving things to the cloud and running your infrastructure in the cloud I think offer some great promise must have lower costs and also increased security and you're at Arby s then in Oh eight. Oh nine is the best so The reason I missed a crisis as we had merged with Mellon and I stayed through the transition We had appointed a new CEO. So I wanted to go do something else and I was out by July alive. Oh eight the crisis was in the fall of Oh eight. It was nice not to be in the hot seat during that I was working in private equity for about a year trying to put deals together and RB. CBS came a calling They had wanted to put a new management team in place to help right. The ship after our BS took a tumble in the crisis and needed a government. Bail out so so I joined Stephen Hester there. I was the CFO and we had a lot of surgery do in terms of shrinking the bank and getting it back to safety so you mentioned private equity. He's citizens financial is sort of A. Can I call them. A middleware. Sort of Bank does a lot of work with Not The giant entities out there but a lot of very the large entities that I think are a little below the radar of the public. Is that a yes. Oh here's the you know. The kind of lay of the land in terms of our commercial business business so We focus on middle market companies. which are maybe twenty five million to five hundred million in revenues and then also the mid corporate segment which is five five hundred million to about three billion in revenues Over time since I've joined citizens we've taken the middle market Customer count from about. Two Thousand Rosen up to about three thousand and mid corporates. We've taken from about five hundred to about one thousand so We've grown faster at the bigger company and end And what you need there to be competitive. Is You need bankers with industry expertise so we had to go out and recruit in some bankers For technology or healthcare care energy So they really serve those customers well and they could bring previous relationships from their last bank over to citizens and so we've had some some really nice growth but we're not focusing on the household name fortune. Five hundred companies were staying a little bit below that radar and we can compete very effectively actively against the megabanks. There's oftentimes we're leading deals and we'll have J. P. Morgan or be a writer. Were winning a swap transaction against the megabanks so we have really good capabilities ability but we stay focused on an area that that we know and we can compete effectively. So I've noticed on Wall Street hedge funds and venture capital seem going through a bit of a rough batch but private equity just is a house of fire. It just spans rapidly. How does that well? Private equity is Is a good customer segment for us in the Commercial Bank and we have focused over time on say fifty to sixty sponsors that we know. Oh well That we think are good operators. They invest wisely And they're good to their banks and and when they need to put equity back into a deal to right the ship. If something's a little stressed they do that so That's where we've stayed focused. We haven't tried to move and compete for all the businesses taking place there and I think client selection has been really critical so those firms know us. Well give us the swings at the Bat. They let us Lead transactions actions then also provide more services to their INVESTI company. So that's been a really good strategy for us I would say Similarly with commercial real estate state The developers we focus on. We've known for a long time. We think they're good operators and so again We build those strong relationships and we get good swings at bat when they're doing things and Like to include us in the deals that they do and then they give us a chance to get more of their wallet because they know we have the capabilities. That sounds quite quite interesting. Yup So let's start with a really broad topic since the crisis ended in nine there have been just enormous changes ages in banking and regulation even the entire economy. How has the role of a CEO? Running a bank changed over this period. How has banking changed over here? It's a very broad question. Break that down so you know after the crisis it was clear that There there needed to be some reforms. I around I'd say the Prudential Regulation about how banks Did they have enough capital that they have the right funding and liquidity structures and so Where they've managing risk the right way so we had A whole framework that was put in place that was agreed globally leap basically around capital liquidity funding running stress tests And I think that was really positive. So we learned a lot from the crisis and we put those lessons to use so a big part of our efforts. Early days was to make sure that we were keeping up with those increasing demands Around on the prudent regulation the second element of regulation was around really conduct and culture and so banks I think weren't always that transparent with their fees as and sometimes they were working against their customers. That are working for their customers so there needed to be changed there as well. And so that whole agenda came in in the second wave after the prudential credential agenda and I think that's also been very positive in terms of creating the right mindset and culture inside banks in terms of you know we have the trusted adviser we have to be working for the benefit of our customers giving him good advice being simple being transparent on our fees. Have we come full circle become a long way at the one kind of bump in the road unfortunately was the wells Fargo Selling scandal which kind of made folks think well. Maybe there hasn't been any change here in banks when in fact I think most of the banks had come through and made the appropriate changes. Yeah that was a black guy for the industry and they're paying the Piper for that They've now have a new CEO and they're working hard on their regulatory equation and it's been a great bank for generations and will continue to be. I think they'll get back on track but that was that was unfortunate for the industry. I think So the regulatory agenda was a big thing to keep up with The second thing that's changed a lot is You know technology has moved in warp speed to kind of dimensions. Nobody thought possible. So moving infrastructure to the cloud new ways of development around an agile framework which speeds things up going to digital first business models Using data to personalise personalized Offers to your customer. So they don't waste their time You know you see what's happening in other industries and customer expectations for Change Range and for a level of service have really increased Given what they see elsewhere and so thanks have had to make the investments and go through a significant can change in the business model to to meet those expectations. So it's really kept it very interesting to to keep up with all the change that we've had to over over the last few years you know when the new CEO of vanguard came in the his answer to a question. I found most fascinating. What what keeps you up at night? His answer was security hackers. How big a deal is that? And is technology helping us in the space or or making it worse well is to be an arms. I think it is a big deal and I think most. CEO's of financial institutions trusted with keeping customers assets. Let's in data safe Have to have that as the top issue on the priority list. Top risks that we face Fortunately there are advances in technology and new tools to actually Help protect All of those those assets and that data And you know I think it also Requires hiring top talent We feel really good at citizens. We've hired a leading expert in cybersecurity. Had had some big jobs elsewhere Who I think knows what good looks like and has moved us into the future? Very very quickly has good. followership has brought additional dishes. Good people into the organization and then we've prioritized tools that she needs to really keep the bank safe. So that kind of goes right to the top of the capital capital expenditure lists and I think that'll continue to be the case because there's a lot of bad guys out there. They don't come into branches with a Stocking over their head and water pistol title and pass a note to the teller anymore. That's less than less days. Yeah it's it's much more sophisticated now. They're sitting in a you know in a cafe Faye hacking away buying data off the black market and trying to figure out ways to to Steal People's assets unbelievable so you lead the IPO in twenty only fourteen. What was that process like going public? And how happy are you that you're not. You know attack Unicorn having a face. What companies I look? I think citizens had That Great Foundation Serving a good part of the country Because of the troubles of the parent there there was a lot of work to do so the balance sheet had shrunk dramatically and hadn't kept pace in some ways. Investing in technology and in our fee based businesses doesn't so there was work to do when we had the deadline in terms of taking it public The Best I could do really was assemble. A strong team and board I put together a really good plan and have a vision where we could take the company but it was. You know we had to do it within a year and so we were still operating at relatively poor you're profitability levels and we still had a lot of gaps but we had a good story to tell so actually just getting the deal done and getting investors to kind of by the promise And by our experience our vision felt really good. So that was that was important to get that done and launched that I would say you know. The experience of going public really helped facilitate our turnaround because usually divestitures banks get sold. They don't get IPO. So this was an opportunity for me to assemble management team. And say look. We're in a unique situation where we get the keys to the car and we have the steering wheel and we can take this bank where we want to so we can build a great bank over time. And you're going to be a key player in doing that. So that allowed us to I think attract the levels of talent that had citizens stayed a part of our bs we would not have been able to do and ultimately in any organization. You Win with great people win with talent So that was that was really positive. Ositive I think the other thing also is that it Kinda shook up the culture at citizens that as a sub of a foreign entity that has its own troubles you could get comfortable in bit complacent now. We had public shareholders who wanted to hear about the long-term vision but they wanted to see good execution in the near term towards that path And so we had a higher level accountability that we embedded into the culture So we're accountable to shareholders and were countable others to serve our customers better to run the bank better so you sit on the Federal Reserve Bank of Boston Board representing other banks what is what does that expands. It's like Oh that's great So if you if you flash back to the last two years I was on the Federal Advisory Council so I was representing the the the Boston Fed district in meeting with the Fed Board of governors and talking about issues and making giving color on economic conditions as an offering advice on certain financial matters so that was good and then I rolled onto the to the Boston Fed and so We talk about the economic conditions in the New England region We talk about The macroeconomic dynamics sent Where interest rates are and where they where they should go because because You know the Boston Fed president gets a vote In terms of what to do with interest rates so you're an influence of him but not a voting member. Obviously yeah obviously nicely. Yeah so quite interesting. You're on the board of Moody's for a couple of years. This is post crisis. What is that experience? Well you know. Well what's interesting is You know most. CEO's can have one outside board slot. And even when I was a CFO for many years. I always had an outside board slot. When I was in the UK? I was on Lloyd's of London Sport. Oh really does and the entity and found that You know would complement what I was doing as an executive because they're specialists in risk management and that's our principal responsibilities. I make sure we're running a safe and sound institution and so when I came back from the UK UK and came into the US. I was looking for a job. That would also be complementary where I could continue to Stay in tune with the latest developments in risk management and kind of seeing the lay of the land about how Moody's Thought About Global Risks and so That was just a natural thing for me to go from Lloyd's of London to go onto the board of Moody's so I've been a critic over the years of the rating agencies primarily S. And P when you look at the fines post crisis Moody's paid a million dollar fine. SNP paid billions and billions in in It wasn't quite that much of a spread. SNP billion settlement with the with with the DOJ was about a billion three and was about eight hundred so is that they were ultimately but they pretty much seem to have gotten much much less blame in the popular press than SNP. Yeah I I don't know why that is but You're you're this predated you buy. Yeah I mean we had to we we. We settled while I was there on the board got involved in looking at the facts and looking at the allegations. But I do think Moody's fact pattern generally was was is in pretty good shape But still there's some some culpable. You weren't going to escape without some culpability and I don't know you very well but I suspect from everything I've learned about you in MM preparing for this. I suspect you're sort of guy who comes in and says let's get this resolved. Let's move on. We have a business to run. This happened before it predates my involvement. Let's write that check in and get on with. I'm just I'm just one board member but Yeah we had those types of conversations. I can imagine that the market kid is really focused on the future. They don't like to have these overhangs in the past and so he's just gotta put him behind you. Let's talk a little bit about apple you know when when I first started Reading about citizens financial my initial response was. Why is that name so familiar and I just punched in into the search coach of my computer? It's like Oh they finance our our iphones Tell us a little bit about. How did that come about? What how I I know that's a relatively minor Thing in the overall revenues of the bank. But it's kind of interesting because it is a name brand and tries her or proprietary public without yeah to be to be a partner for the most iconic company on the planet in my view Really is a lot of credibility for us so sure were quite pleased that we hold. Hold that position You know we had worked with apple early days When we were building up our student loan business potentially With the notion that we could help them finance The purchases of their equipment in student book stores in college and that program didn't really fulfill its potential But I think we got to know them well and they liked our focus on the customer and really obsession around the customer experience because that's really defines apple so when they were thinking about The upgrade program and how to sell more phones through their stores We helped work with them on that program and design the financing for that program And I think we built a very effective Platform Platform to process those transactions. So there's a very small window of time that as you know since you've event twelve months you found but you go into the store. Are you pick your phone. And then we have a little window to make a decision. Do we want to finance you In the program or not and without getting a lot of information so we've built very good credit decision model and then a very good processing capability behind the scenes that leads to a very good customer experience a very very highly rated and ps within the apple store experience so anyways instantaneous. It's it's gone exceptionally well on on the days. Just when they launch a new phone We get massive volume that we have to process always been able to flawlessly execute all that volume so so I think it's been a good partnership and the Nice thing is the technology platform that we built for apple we can move an offer it to other merchants And adapted to the needs of other merchants and so today we also have. Adt In vivid too smart alarm companies are running similar programs and we have a number of other big household names in the queue and so I kind of tease investors. I say stay tuned watched the space. Because we're going to announce roll out to some other Very highly regarded companies. So I'm curious as to how this works because when the first time we went into an apple store too and I'm always complaining I'm a power user phones and after year the battery life starts the die the last phone. I replace the battery at month. Fourteen and I said wait twelve months new phone. Where do I sign up for that? It was a pretty surprisingly. You Punch a bunch of things in data birth of security security name address and it's like eight seconds later you get approval. I assume you're looking at things like credit score payment history it Sarah. What what what? How many data points go into that that it could be bad? So number of data points We don't want to give away the secret sauce Berry but I think we feel quite like confident of our ability to make good decisions and I think we now have been at the program. Now for a number of years and so we've seen the performance of all the different different vintages and performed at or above expectations. You tweak this on an ongoing basis always make it a little better on a little. That's that's that's kind of interesting so I have to think this new iphone eleven. The week it comes out. What is that like? Is this giant fire hose of data or thirsts. There's a big swell of volume and It's great for Apple. I think they're pleased with how the eleven is being received in the marketplace. And it's gotten great reviews. Yes and despite the price. It's pretty expensive. Well they've they've had for a two-tier price right So I think you could get the eight for a very cheap price nice. Dave now covered the full spectrum prices as opposed to just be right so I think they've thought it through in terms of features and pricing and alternatives. And it's meeting a good reception. which is good for us? That means there's going to be good demand for the phone People continue to participate in the upgrade program. And so we continue to grow the balances onto the program. I'm an I deal Klein for you. Guys we walk in. What's the biggest phone? What's the top line game? You extra storage. Wait it's fifty bucks a month okay. Great will take to it. Really really is a very simple thing and the only problem. Is You want upgrade after a year. And sometimes you waiting a couple of months for new phone so you end up holding onto APO than that. You're never really obsolete you're always getting the latest and greatest which ask appealing Some people don't care other people want whatever for the most bourgeoisie. The thing is I am an early adopter even though it it can occasionally be painful when you buy things before they're really ready for Primetime And thankfully passed on the Google glass but anytime I have an opportunity to upgrade the phone. I'm I'm I'm there right away. I have to think that where you you sit in the economy looking at consumers looking at other Businesses and entrepreneurs. You have to get a really early. We read on any changes in the economy. Is that a fair statement or am I overstating it. Yeah no look we're Kind of cover three regions agents of the country so we have New England mid Atlantic and upper midwest within our footprint Three very different economies economies. And we recover as I said earlier. The mid mid corporate middle market all the way down to small business and then we have a very big consumer business the balance of our businesses roughly fifty fifty between corporate and also The consumer So we get it we get a quite a good read on You know both data in in terms of you know our how our borrowing patterns our charge card usage Cetera And also anecdotes just water. We're hearing from customers immerse What's the businessman doing? Are they buying that next piece of capital equipment or are they holding back because of the trade tension So I think we we get a well informed view of what's likely to come up in the economy if there's a recession somewhere out on the horizon where would you see it. I is an spending patterns. Is it in payment patterns. Where does the what line of business is most sensitive? Yeah so I you know I think the thing that you really want to keep your eye on on is credit deterioration so meaning late payments so in the consumer side are you seeing migrations into delinquency buckets. That people are starting to stretch and have difficulty keeping up with obligations same thing on the corporate side of their particular segments of the economy that are starting to stress trestle little bit and so to me. That's a key early warning sign. Are you seeing any of that today. We're not we're not. Yeah so so. There was a Wall Street Journal article about Middle Title Class Consumers moving towards a seven year versus the old five year Loan for automobiles in. That could be a sign of of some. I don't I I think people maybe are holding their cars longer. That's a little more affordable to stretch the payment out over a longer time so and he's caused now last much forever they do they do so You're not seeing. A lot of people have been nervous about. Salmon have been nervous about residential sales. And I you know the recession east. It does have been forecasting a recession next year for the past five years. They you know eventually they'll be right but doesn't mean we don't we don't see it You know I'd I'd I'd say There's some recent data that manufacturing sector is a little soft but you have to remember in the context of the US economy the economy's powered seventy percent by consumers and consumers are in great times unemployment's low people can find jobs. Real wage. Grossest got Ways point two percent inflation down at one and a half so people are having expanding Net pay over inflation which is great So the I think the consumer is watching some of the current events. They're watching the trade and they're watching the Impeachment proceedings but. I think they're almost inured to that. It's been around for a long time and it hasn't really really caused anything and so people are aware of it. But it's not holding folks back where it is holding people back. A little bit is the kind of middle market companies companies sitting there saying how is the trade tension and the tariff's GonNa impact me and it's GonNa affect impact different sectors differently again. Service economy is not that impacted by it but the manufacturing sector is and fortunately for us the service sector dominates our economy. Let me so but you guys have have offices in the Midwest. Seeing serves dresses storing form on at least on a small base. I think a lot of companies are thinking about their supply apply chains and how to adjust their supply chains to try to minimize the impact from the tariffs and you know what it forces everybody to due including the banks is. How do you get more efficient if you're going to have these costs that come in from external from Some of the administration policies. Then then how do we protect our growth in earnings etc.. So deploying artificial intelligence deploying robotics finding ways to keep streamlining how business business gets done becomes an imperative when we think of traditional banks. We tend to think of the yield curve as being a determiner of their profitability ability when the yield curve is steep. Hey there's a lot of spread to be captured and they make money when it's flat or as we've seen the past quarter inverted very challenging for those banks. How does that affect the Middle Market Bank? Like yourself yeah well it's Certainly move something. That's been a tailwind for the last two years it's rates were going up. Most banks are what's referred to as asset sensitive so their loans are repricing faster than deposits and spreads are widening. When you have the flip and rates start to move down then your loans are repricing downward faster than you can re price your deposit so it puts a little pressure on your net interest margin Certainly you try to hedge that To some extent but You are GonNa have an impact And then will be contracting somewhat How do you combat that? I mentioned earlier. The expenses focused on expenses. We had launched a very big transformational cost program We kind of saw the the tea leaves about The Fed either pause or maybe start to cut rates and so we got on this back in December and we launched a big program in July. We're also over the time we've been investing in our fee based businesses and we've done a couple of very smart fee-based acquisitions what are those fee. Based businesses well in the commercial side we purchased to emanate boutiques to broaden out what we can do for our customers and there's still been good flow of emanate opportunities occurring hurrying in the Middle Market We bought a mortgage Business which Timing was great on that because as rates go down as the Fed's cutting rates is it maybe crimps your name a little bit but Nimh standing for that interest margin the spread that you're making on your balance sheet but there's a refi boom like we haven't seen in years taking place rates happy refinanced your mortgage but I literally. was there Friday doing paperwork and the numbers are just insane. Yeah so so to eight on a ten one mortgage and I'll have my mortgage off in ten years to if we need percent I don't ever have I know I can't recall having having heard of rates that low I I WANNA say thirty year fixed was three five and a half these are just these. He's a great opportunities for consumers to put more money in their pocket and lock in lower carrying costs on their debt. And so we make fees When that happens so oh fortunately this quarter? We're going to have a really strong third quarter on the fee side which will offset any of The leakage that we see On the balance sheet income side And then the last acquisition that we did was we bought a high end wealth adviser Because what we found is in the corporate side the business owner the fourth generation Family that is very wealthy and occasionally takes out large dividends ends from their company and puts debt back on the company. We weren't getting the swings at the bat to manage those assets the estate planning For the company so the the folks thought us as their bank but they would take that business elsewhere and so we said look. We should be doing that for those customers We went out and bought a company called Clark failed asset management inch which is a highly respected wealth adviser in based in Tarrytown New York and so we're now able to offer those services so Really not trying to do do anything too big but just hitting the sweet spots with kind of rifle shot acquisition program which has really been positive so it sounds like your business lines are pretty diversified diversified. Yes yes so that. That's a good thing. It is So you mentioned the Fed pausing and starting to reverse itself officially mortgages rates make a big difference. How how did QE affect the rest of your business? And and how does all the noise which which seems to have faded along with the summer about the president and the Fed doing battle. How does that impact? What what you guys do well Obviously the actions. The Fed takes has a direct influence on the economy and on the money supply and the cost of funding and so It's going to impact banks the material way Quantitative easing I think was a stimulant of measure which basically The Fed was building up their balance sheet so taking on securities and Buying those with cash and putting cash back into the system so it helped promote liquidity in deposit growth and promote lending Rates came down as they were buying those. The long end securities So you know we just have to be in tuned for where the Fed is going And when we do our forecasting forecasting we do our business planning We run a bunch of different scenarios. Is You know what happens if this is happening in the economy. Then what is the Fed likely to do but in any case we we just need to be flexible and adapt to the circumstances that we see so I mentioned diversification and and you mentioned you're in the Southeast Northeast and Midwest so Boston Philly Pittsburgh Providence. DETROIT any thoughts about expanding elsewhere. Or you eventually going well. There's a couple of things so on on the corporate side As we move to the mid corporate space which are slightly bigger companies five hundred. Three billion We need to be national in those industry verticals and so we've planted a flag down in Atlanta. So we have about twenty five folks down there at this point Brought a guy out of Suntrust Austin. He's built a nice team down there. We've expanded now into Texas. which is another big state economy? We always had an energy practice in Houston but we put some more commercial bankers in Dallas and in Houston. We just hired a fella to pull together our team out in California. So he's going to be based in L. A. and so You we'll be on from a corporate banks standpoint more of a national player and I think you're seeing that as a trend for all of the Super Regional Banks On the consumer summerside. We've attacked that Our consumer lending operations or national but in really direct interaction with consumers around deposits. We were the first super regional bank last year to launch a national digital bank called citizens access Online only online online only focused on savings products After a year we now have five and a half billion of deposits and so it's been highly successful and so what we're thinking about now is we've gotten good at that if you say. That's a deposit mining operation regular track deposits. But what else can we do for those customers. And what else else can we do for many of the customers. We've now assembled through our lending products. Who might be thin relationship customers? They know as you may know us because you're apple loan alone is with us but could I come to you bury digitally and offer some things in a bundle to say. Hey that mortgage refinancing do it with us or Other other needs that you might have had to manage your your wealth portfolio. We have digital tools. That would allow you to do that. And be pretty true at how you do it. So so That's kind of the next phase for us is we probably don't WanNa have branches outside of our traditional footprint but we can I think attack the national market Arca digitally What you're seeing this very interesting? There's a lot of experimentation going on so the megabanks like J. P. Morgan or saying we're going into all these new cities they're actually not increasing our branch counter thinning branches where they're thick reading. They're putting them if chase has a big customer base around there Sapphire Card in a the city. Okay we should have branches there too so we can do more with those customers. You've seen some super regional competitors like PNC. They now have a digital bank up and running in their putting thin offices. This is they got three in Kansas City putting ten or twelve in Dallas and so everybody's attacking this a little differently. We WanNa get our brand out there. We want to be more national national in scope. Do we need the branches or do we not need the branches. That's one of the key questions. Settle in the Petri dish right now. We'll see how it plays out. You mentioned super regionals and also we seem to go through these cycles where suddenly the majors or acquiring super regionals left and right and then we enter a lull for a couple of years ears. What are you see? I know I obviously can ask you about your bank. But in general looking at the industry what do you see for the M. on a landscape for the megabanks in the super regionals. Are we done with rolling up for now. Or how does that change. I think I think the megabanks most of them are at the deposit. Posit cap the national deposit them so they're really not players that can't play You did see super-regional space of merger of equal between BBN Tea and suntrust. uh-huh which I think was fairly unique created a southeast champion and I don't think the other super regionals feel compelled to act in the wake of that. I think right now there's so much change taking place in kind of moving your technology ecosystem to the future that Ram merger could be a distraction so if we can be flexible Abol Nimble and good and make the right decisions I think we can still compete effectively at our size so I'm not sure you'll see much more super-regional space this year But I I think the smaller banks who really have to contend with all of the cost of that new technology and some of the cost regulation even though the regulators are trying to give them cut Adam a little slack. I think there's an impetus to see. The smaller end of the market could take continue to consolidate we. We had an issue post-crisis or at least compared it's a pre crisis a lot more megabanks a lot less competition. More of the national assets held by fewer banks. Is that an attempt him to sort of resolve that issue or am I reaching too much here. Yeah I think you're reaching a bit I think if you just look at the trend Twenty years ago there were fourteen thousand thousand depository institutions in the US. Five years ago it was seven today. It's like five and so you're just seeing that concern in inevitable consolidation. Because we you still have. I think a much more fractured Banking landscape than any other country. We have been speaking with Bruce Van Saun his CEO of Citizens Listens Financial Group. If you enjoy this conversation we'll be sure and come back for the podcast extras where we keep the tape rolling and continue discussing all things banking related. You can find that wherever you're finer. PODCASTS are sold I tunes Google Stitcher spotify. We love you. Comments feedback and suggestions. gestion US at M. I. B. Podcasts at Bloomberg Dot net. Give us a review on Apple. I tunes be sure to check out my weekly column on Bloomberg Dot Com. uh-huh sign up for my daily reads at rid. Alz Dot Com. I'm Barry Ritholtz. You're listening to masters in business. One Bloomberg radio. Welcome to the PODCAST. A Bruce Thank you so much for doing this I It's always funny when I see different names. I I have this pet theory that there are thousands and thousands and thousands of people working who have a giant impact on everybody's day to day life and nobody knows who they are. Everybody knows knows who Steve Jobs was. Not Everybody knows who Bruce Van Saun is and yet. You're impacting what what people do so. I was I was looking forward to to this through a couple of questions. I did not get to that I'M GONNA try and run through now and then we'll we'll do our favorite questions and we'll get you over the TV on time Oh so you guys went public in twenty fourteen. I've we have all heard lots of Folks Complain Plane About the IPO process and how difficult it is being a public company. How does that square up with your experiences running a private company and and then taking it public so I actually think it's been very positive for citizens part of it is where we we came from We had to turn around the bank and so Having the an interested investor community and twenty to sell side analysts a Focused on us and prodding on our long term strategy and putting estimates as to how fast we could turn around the bank. It certainly raised the level of accountability accountability. And I think our ability to execute Improved you know when I when I think about the trade offs people say well private private companies can can quote unquote go long. They can think long term and make the investments for the long term and they're not kind of hemmed in by the need to deliver quarterly results. I actually think that if you communicate effectively what you're trying to do for the long term and you say I'm GonNa need to invest some money in this and this is why I'm doing it and this is how fast I think I'll get the payback. There are long-term investors out there who Who appreciate that? Who who want to invest with a growth story with the management team? That's trying to grow the franchise and not just Really focus on cost cut and the delivering for the next is quarter and buying back shares. And so we've tried to balance that we've tried to make sure that we're executing well and putting points on the board and showing a good trajectory in the short term but we're also doing significant reinvesting And trying to grow the bank so that we make it stronger five years from now in ten years from now so all the complaints about how onerous being a public company is and the threats from activists investors is is that all overstated stated or. What do you think if you if you run the company well and you actually think through an activist agenda like what am I missing in terms? My own plans are there. If an activist was involved in this company. What would they do? Would they take capital away from these lending portfolios and move it to this lending portfolio it. Actually you can proactively anticipate Where they would were they would make suggestions and just get ahead of it and and you know it's helpful Takata keep that mindset. It insulates you from attack. If you're beating them to the punch interesting I I mentioned. You're on the Federal Reserve Bank of Boston as well as The board of directors and Moody's to other things. I want to mention because I think they're both interesting interesting. You're a board member for the Bank Policy Institute. What does the bank policies to do what are you? What is your involvement Tell us a little bit out. Yeah so the bank policy institute is a relatively new creation with a long history and legacy organization before it which was was originally the bankers roundtable which became the financial services. Roundtable I think What's the correlation between this so now? BPI BPI has effectively succeeded. The Financial Services roundout you and I think there was a desire at one point to put different industry groups in financial institutions under one roof. So when it was. The bankers roundtable was just bankers than it was financial services asset managers and ensures all got together and we would have meetings and interact You know on policy Talk to folks down on the hill. A lot of the meetings would be in Washington but over time I think the agendas of the different subsectors were different. So Under Brian Moynihan leadership who runs it was determined that the the bank should split off and keep a kind of larger bank profile minimums asset size twenty. Five billion would throw in to this Bank Policy Institute An effectively work on policy matters and things that impact the economy in having ability to effectively operate like a think tank put out papers and monitor monitor. What the Fed is doing and respond to requests for proposals from the regulatory agencies and have an ongoing dialogue with members of Congress so they were informed on financial shawish use that impact the real economy quite interesting? Yeah and then you are also a board member of the Partnership for Rhode Island and jobs for Massachusetts. Yeah what are these these two groups do well. Those are efforts to Stimulate the local economy and Get business people to work together to Help the governors of those States you know Dr Pro Business and and pro growth and pro jobs agendas And so the the one that We've had some really good traction. In particular with Partnership for Rhode Island where we've focused on education And and also business attraction and transportation which are important to improving the Rhode Island economy One thing we did. Recently as we funded the Johns Hopkins Review of the Providence School System. I don't know if you've seen it caught a lot of national press but Basically basically was pretty damning of the state of the school system and Now we're just going to say that in pretty much any school system well but some are better or worse this was this was really pretty low down the totem pole and there needs to be changed. And so the state's GonNa take over the administration of that school district and I think make make the changes. That'll make sure those kids in that community really have a chance to prosper when they come of age and are entering the job market so Those things feel good You know working in collaboration with governors and with the government to to bring business influence and money behind things things that are going to improve local economies. One of the things I've noticed with some of the business development groups has been a sort sort of and we saw a little bit of this with the Amazon headquartered bake off but we've seen this sort of tendency to give the store or away in order to attract specific companies as opposed to just creating an environment that is helpful and easy to operate in for businesses businesses. What do you think of those? It's almost like a race to the bottom as I think. Last proponent of that and You know we had an an opportunity. a couple of years ago. We hit a fork in the road. We had a very large leased facility in the greater providence area uh-huh and a couple of other smaller leases that meant Thirty two hundred people were kind of going to roll off their current occupancy and we either renew or do something different We decided to break ground and build our own campus in a town called. Johnston Rhode Island which is little west of Providence Got Thirty two hundred people there. Four hundred twenty thousand square feet Beautiful campus with Sports fields that we share with the local community walking trails through the woods And we didn't take any funding. We didn't try to hold up Rhode Island and say I want you to compete against Massachusetts. We just said this is where we WANNA be. This is where our history has had us and we have a great Colleague Basir And so you know. I think the government was helpful in getting things we I needed like an exit ramp off of the highway into our campus for example so there were the state or the local city is supposed to be doing as opposed to tax giveaways. So that we we split the cost with the state so we made half and they paid half for that exit ramp for example. And you know some of the some of the local authorities ladies put sewer lines in on an expedited basis so we could get the campus up and running so Yeah I think it was. It was the right thing to do and we didn't have our hand up. I I have Osama. NFL team owners. I'd like to introduce you to. Maybe you convince them to stop being socialists and actually embraced capitalism. Yona football team. Build Garrone. Damn Stadium I know. That doesn't win me any friends but it just seems like a reasonable thing to do. I just was reading The Cleveland one cavaliers. Their stadium needs an upgrade. And they're asking the taxpayers to pay a couple of hundred million dollars. You'RE A billionaire fisher. Stadium leave us out of it. I can't obviously. I'm not going to talk about anything in Boston. Sports as a New Yorker. I just don't even want to go there. Let's see if there's any other questions I missed that I wanted to get to. We talked about that. We talked about that all right. So let's jump to our favorite questions that we ask our guests. These are the ten questions that are supposed to be revealing of who you are and how you got that way. Tell it's the first car you ever owned year making model Ford Mustang to rea- nineteen seventy four. I was still still a year away from my license But I had worked summer jobs and MY DAD said I'll pay two thousand dollars to any car you've got to come up with the difference right. We paid eight thirty two hundred dollars for that car and so I got my license. I was driving a brand new car. So wait you bought that car before you. Actually it was. The model year was leading out or something so I thought he could get a deal on it so but I think it up at the end of the you had the twelve hundred dollars from working summer jobs. So I put my share. That that's great What's the most important thing people don't know about Bruce? Van Saun I you know one at my early jobs was as a landscaper jobs to make that money for the car and I still love to garden to this day so take great pride and Designing a nice landscape and then maintaining it Tell us about your early mentors. Who helped guide your career? Well I always mentioned my parents because I think they gave me a great foundation and moral compass but You know as as you as you grow up. It's your teachers and favorite sports coaches and so that all goes into making you who you are And then I had some great people that I worked for had a fellow at General Mills. My first job out of college. who was tall? Lanky athletic guy like me but really smart had worked at General Motors learned. Learned a lot from him. He was very decisive Worked for Bruce Wasserstein. One of the smartest show is on the planet He had a lot of Bruce's that I picked up and a lot oughta wisdom and so I always found that if you want to move ahead in a career that you're you should look for great people to work for that you can learn learn from so when they're interviewing you you should also be interviewing them to make sure that these are people that really are going to have an impact on you. What about bankers? That influence the way you look at the business of banking who who affected your to bankers. I would call out Tom Renney was my boss at the bank in New York for many years. And I think Tom had a had a just great stoicism to to be inflammable bowl under all kinds of scenarios. and kind of it's never. It's always darkest just before the dawn that kind of mentality. It's not as good as you think it is when it's when and it's Going really well and just kind of keep that even Keel. And then the second one was Stephen Hester when I worked over at Arby S who was under immense mentz pressure to get Arby S righted but Just was so unflappable under all that pressure and again keeping that even even Keel and just Super Super Smart Really good thoughts about how to go about that. Turn around which some of those things I have applied to citizens on a smaller scale. Obviously than Arby S What about books? Tell us about your favorite books. What do you enjoy to read I read a wide Range of books Read a a lot of business books. I read You know Tom Clancy Harlan Cobaine. Those kinda books Probably the the book that's had the biggest impact me on my whole life was has the power positive thinking by Norman Vincent Peale's so that really positive attitude which I read probably when I was in my early twenties so I totally enjoy reading. Unfortunately I have I have so much reading to do for work in such extensive twenty four seven of work agenda that. I don't read as much much as I could but I'm still probably read. It doesn't books a year I would say give give us another title one other that you really enjoyed i. Would you know I just I just read A very interesting book. I can't I don't remember the title but it was about And an elephant trainer who basically led these as elements in world. War Two and the kind of Burmese jungle which to me was really fascinating. Let's see if I can find how Burmese elephants helped defeat Japanese Japanese in World War Two. Yes salfan company. There it is is that was that was it. That was the name. Let me get. Let me see if I can read the exact name. That's wild. By Vicki Croke Elephant Company the inspiring story of an unlikely hero and the animals who helped save him lives and will were too. Yeah Wow wow. That's quite quite fascinating. Yep Tell us about a time you failed and what you learned from the experience but by the way a thousand ninety two reviews views five stars. That's pretty that's pretty impressive. And it was a good book so you might want to put that one on your list. I definitely will Tell us about a time you failed and what you learn from the experience spirits. I say getting cut from sports team was kind of a big moment for me has tall. Did you play basketball. I played baseball basketball ball and a little bit of football for a couple of years but I got cut from the Varsity team as a sophomore in high school And I really was angry. You went through all the emotions that go with that but I picked myself up and we went a bunch of US went and joined travel basketball team and we played you know we had so so much fun and then we got to play the high school team in a kind of just a Braggadocio game. I'll bet you were better than you. And we beat the high school team when we got great. That's great revenge. Michael Jordan didn't make acting as a freshman that he got caught and he used it as motivation as well. What do you do for fun? What are you still playing hoops or no more? It's a little risky at this age But you know I still enjoy sports so golf tennis swimming like to go to the beach. Sh- yeah I was a commodore at our at our sailing club So love the water and you know like good dining going out Having a good time with the family and friends will you plenty choices for restaurants restaurants here. Yeah so in the Banking Industry today. What are you most optimistic about? And what are you most pessimistic about. Well I'd say You know when I look at at this country the US that that we serve citizens serves. I think it's the greatest country on the planet and and You know we have our troubles. We have our challenges. We're not perfect But over time we've continued just to I think get it right And we're we. We have an innovative society. We've got the big tech companies. We're trying to improve people's lives. And so I just think about how the quality of life in the country is so much better than it was in in nineteen fifty nine hundred seventy five thousand. Just think where it's going to be going forward so I'm optimistic about that I'd say the things that I'm disappointed. Appointed inner pessimistic about is that people. Don't feel good about it. So the flip side of that is we have so much to be thankful for and so much to to count our blessings for but everybody seems to be grumpy angry and not step back and say Gosh look look what we have So anyway I think we've lost our soul little bit. We've lost our or spirituality which I'd love to see that rejuvenate at some point it does seem that people are a A little more divided a little more angry. It's it's some of its social media but some of his just you know the the post-crisis state of affairs people never really fully recovered their optimism. After that it took a long time after the Great Depression before that Anna Anna World War before people seemed to resurrect that can do American spirit. Yeah so a millennial or I'm GonNa say that again because I have to drop millennial 'cause they're too old now so a recent college Grad comes to you and says they're interested in banking. What sort of career advice would you give the item? It's a great career and You know what I love about it. I think it's a noble noble profession. So I tell people look you get to positively impact people individuals Communities Local Gulick. Connie's by what you do in your day job working as a banker but then we also have a platform that you can Volunteer off that platform former further that impact on local communities and so for example Citizens Bank. When I joined six years ago we were volunteering about fifty thousand hours? I we really had a focus on upping that and today this year we're GonNa hit about one hundred and fifty thousand volunteer hours We have seven hundred people serving on local boards around our footprint and so If you WANNA have a career where you can learn be challenged constantly gently evolving landscape that you have to contend with but importantly you can positively benefit the the the the people that You live with and and local communities and economies that you live in banking's a great career so normally I don't ask follow up questions in the segment but you just made me think of something not too long ago. The Business Roundtable changed their perspective on The end goal all of the corporation is maximizing shareholder profits. They now look at it as there are many different constituencies And that that seems seems to have been a pretty large sea change. What did you think of what it sounds like? You've already adopted that. Yeah what did you think of this. If we I think it's been a little controversial controvercial because ultimately you're working for your shareholders you know management is an agent for the shareholders of the bank. I think all those Different different stakeholders work together. And so you're trying to deliver for customers for communities for your colleagues the three Cs if you're regulated related got to run a business the right way for the regulators got to deliver for the shareholders. You WanNa get that flywheel working but to me. It comes back to the shareholder. If you're running the bank well You'll have the resources to keep investing in all the deliverables for those other stakeholders. So I'm you know I like the concept concept of broadening it out and making sure that people are thinking it's not all about the bottom line but still I think the shareholder is the one that you have to please first and foremost they're the ones with the axe. If if you're not pleasing to pursue your own agenda and make the other stuff more important than see the stock not perform well in the bottom line Not Perform well. It should work together and our final question. What is it that you know about the world of banking today that you wish you might have known thirty years this ago? I I think it's just a cumulative process where where you go through through life and you'll learn things I don't I don't have any AHA moments. I just have gained a lot of wisdom by working in different companies. And I think you know just that that That banks have a big role to play in the economy. They have to be run well in a safe and sound fashioned. Should they have to be focused on delivering for customers And you know I think you've you've come to that knowledge over time I don't I don't know if there's an Aha the thing that I said God. I would have run my career differently if I knew it back then. I think I've just evolved with the changes in the industry and I think I have a pretty good the concept of what banking's all about at this point fair enough bruce. Thank you so much for being so generous with your time. We have been speaking with Bruce then so on he. He is the chairman and CEO of Citizens Financial Group. If you enjoyed this conversation well look up and down inch on apple I tunes and you could see any of the previous two hundred seventy five or so such conversations that we've had over the past five and a half years We Love your comments feedback and suggestions shins. Write to us at M. I. B. Podcast at Bloomberg Dot net. Be Sure and give us a lovely review on Apple. I tunes. I would be remiss if I did not mention in the cracks. Staff that helps put together these conversations each week. Cowan O'Brien is my audio engineer. Michael Boyle is my producer. Solut- Booker Michael Bat. Nick is my head of research. I'm Barry Ritholtz. You've been listening to masters in business on Bloomberg radio.