Citizens downplays interest in participating in M&A boom

• Key insight: One of the largest U.S. regional banks minimized interest in doing an M&A deal.
• Forward look: Instead, it sees a lot of remaining upside in its current businesses.
• Expert quote: “We have a lot of strong growth” internally, the bank’s CEO said.

UPDATE: This article includes comments made by Citizens Chairman and CEO Bruce Van Saun during an interview with American Banker Wednesday afternoon.

Regional bank mergers and acquisitions are heating up, but on Wednesday, executives at one of the largest regionals in the country downplayed interest in being either a buyer or a seller.

Citizens Financial Group , which has $222.7 billion of assets, is instead focused on continuing to build out its 2-year-old private bank and further its expansion in markets such as New York City, Chairman and CEO Bruce Van Saun told analysts during a call to discuss the bank’s third-quarter earnings results. It’s also ready to capitalize on the investments it’s made in commercial banking, he added.

Van Saun, who has led the bank since its 2014 spin-off from Royal Bank of Scotland, mostly minimized the idea of doing bolt-on acquisitions, saying the company’s excess capital would be better spent on repurchasing more shares. In the first three quarters of this year, Citizens bought back $475 million of its common shares.

“We have a lot of strong growth,” Van Saun said. “We’re always alert for opportunities, but … it would have to be a pretty high bar for us to go down that path and look at things inorganic.”

Regional bank M&A got a major boost last week when Fifth Third Bancorp in Cincinnati said it would buy Dallas-based Comerica. The pending transaction, which is valued at $10.9 billion, is the largest bank M&A deal of the past four years.

The deal was the latest in a growing list of bank tie-ups this year. Between Jan 1. and Oct. 6, 135 bank M&A transactions were announced, according to Laurie Havener Hunsicker, an analyst at Seaport Research Partners. That compares with 129 total deals announced in all of 2024 and 102 in 2023, Hunsicker said in a recent research note.

Read more about bank earnings here: https://www.americanbanker.com/earnings

On Wednesday, Van Saun compared the build-out of Citizens’ private bank “to what other people are doing” in the M&A area. In the third quarter, the private bank contributed eight cents to the bank’s earnings per share, up from six cents in the prior quarter, executives said on the call.

“We’re competing to continue to get growth while we’re achieving very strong profitability levels,” Van Saun said on the call. “And so that’s our focus, is to make sure we execute well on that.”

He expanded on those thoughts during an interview Wednesday afternoon, saying that he’s comfortable with the current size of Citizens and the growth potential in its existing businesses. Homing in on certain areas, such as private banking, and being good at them is essential, he said.

“At our size, we have the unique ability to not get siloed and to know what our broader capabilities are around the bank, and to put that together to provide strong solutions for the customer,” Van Saun said in the interview. “That means we don’t really need to get more scale.”

Citizens’ net income for the third quarter was $494 million, up 29% year over year. Earnings per share were $1.05. Analysts polled by S&P Capital IQ had predicted earnings per share of $1.03.

Revenues were $2.1 billion, up from $1.9 billion in the year-ago quarter.

Growth in the private bank was a contributor to the upswing, but the capital markets business, which is part of the commercial bank, was the star. Citizens reported a record quarter in capital markets fees and said the uptick was driven by higher M&A, debt underwriting and loan syndication fees.

Read more about Citizens Financial here: https://www.americanbanker.com/organization/citizens-financial

Fee income as a whole rose 18% year over year to $630 million. Net interest income rose 9% compared with the same quarter last year to $1.5 billion. Expenses totaled $1.3 billion, up 7% year over year, in part because of elevated salaries and benefits associated with hiring in the private bank and strong capital markets fees, the bank said.

Citizens is still aiming to achieve significantly higher profitability metrics. It has set its sights on a return on tangible common equity target of 16-18% in the next three years. For the third quarter, that metric came in at 11.7%.

On Wednesday, the bank didn’t offer too many details about the multiyear expense-cutting program it announced in July. Dubbed “Reimagine the Bank,” the program aims to leverage artificial intelligence and other technologies in ways that will revamp how customers are served.

Brendan Coughlin, who was promoted to company president this year, will oversee the project.

The Providence, Rhode Island-based bank will “give the full parameters of this effort” in January during the fourth-quarter earnings call, Van Saun said on the call. Chris Emerson, the bank’s interim chief financial officer for another 10 days, told analysts that the cost savings will be greater than in a previous cost-cutting initiative that produced more than $400 million of expense cuts.

Earlier this month, Citizens announced a leadership change, saying that Don McCree, the head of commercial banking, plans to retire in March 2026. Ted Swimmer, who led capital markets and advisory, was promoted to McCree’s job. McCree will be chair of commercial banking until his exit from Citizens.

Van Saun told analysts Wednesday that the bank has been preparing for McCree’s departure “for some time.”

He also acknowledged the recent turnover at the executive level, saying that when Aunoy Banerjee arrives from Barclays Bank PLC as the permanent CFO, “the team will have been largely refreshed with several younger, dynamic, outstanding new leaders.”

Those younger executives include Coughlin, who “has the inside track to be the CEO” of the company, Van Saun said in the interview. As for his own future as chief executive, Van Saun said he’s still working on making sure that the new leadership team is energized and well-equipped to successfully lead the bank into the future.

“If the team is solid and … if [Brendan] is ready, if it’s a good time to peel off, I certainly can do that,” Van Saun said. “Nothing lasts forever.”