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Let's talk a little bit more about the CRE market and of course regional banks in general, because we're joined now by Citizens Financial CEO Bruce von Son. Citizens of course, one of the largest retail banks in the US.
Bruce, great to have you on set with me.
My pleasure.
So we'll start with CRI. We're not going to spend the whole time there. But you said last week that actually there's still a lot of uncertainty in the CRE market.
Where is that uncertainty right now?
Yeah, I'd say we're still waiting to see more transactional activity, so the indications of value are not clear at this point. And you know, i'd say rates moving down would actually help create potentially more financings and more transactions. But office
is really the space that everybody's focused on. The rest of commercial real estate, you shouldn't just generalize that all commerci real estate is an issue, because multifamilies in recently good shape, and industrial and warehouses in good shape, retails in pretty good shape. It's really just that office segment that folks are most focused on.
And I hear that from investors all the time too, that there's plenty of opportunity when it comes to CRI, but office still a little shaky there.
But you went where I wanted to go, and that.
Is the FED, because this is a FED that would certainly like to cut rates.
But the data just doesn't back it up there.
So if we are truly in a higher for longer interest rate environment, what does that mean for CRE and what does that mean for regional banks as a whole.
Yeah, I think in general it would be beneficial for cro borrowers if rates came down, But I think banks have an ability to work with the borrowers to try to extend loans if they're still good credits, and sometimes you'll have to. The bank will take a charge off on part of the loan and the borrow will put in some equity so you can kind of re underwrite the loan. So it's just a long workout process that we're going through in twenty four. I think it'll extend
through all of twenty five. We're geared up for that. But anyway, the good news is most banks, most of the super regionals, have a small percentage of their loan book in commercial real estate. We have plenty of capital plenty of reserves to handle it, and we'll really try to focus mainly on our offensive agenda from here, and we're.
Going to get to that.
I do want to meditate on higher for longer a little bit more because you think about the effect that that has had.
On money market funds.
For example, money markets offering five percent and above, that's really attractive for a lot of people, and I'm wondering, when it comes to competing with cash, how has that looked on the deposit side.
Yeah, so I'd say most of the money that was going to migrate into those more favorable investment alternatives has already happened. So if you look back over the last four or five quarters, you're seeing that migration really slow to a crawl. So that's good. If the FED doesn't raise rates again, we've probably seen the worst of it. So I think banks have generally positioned themselves now for
this higher for longer environment, so we're relatively neutral. If the FED goes higher, the FED goes lower, it won't have a big impact on net interest income. I think the bigger impacts from rates moving down will obviously first off help some borrowers, but it'll spur more capital markets activity. You've got a lot of money in private equity land.
It's been sitting on the sidelines, ready to go to work, and so that'll be a good day when the FED decides that they've basically conquered the inflation beast and they can start to bring rates back down.
And certainly the FED would like to reach that point as well. But it does sound like what you're saying is that another hike would certainly be disruptive.
Yes, I don't really see that. I think that's a very low probability case at this point. So I think what the FED is saying is, let's just keep here. The patient is taking the medicine. Okay, we don't need to increase the dosage. But eventually we'll be in a position where we can come down.
So that's the FED picture, the macroeconomic picture. Let's talk about where you are playing offense. I want to talk about your efforts in private banking, in particular.
How is that push been going.
It's been great, really, So we stepped into a void when First Republic went down. JP Morgan bought the bank, but a lot of the talent didn't want to fit into that model. At JP Morgan. So they a bunch came over to us and we have teams now in Boston, New York, Florida, and three teams in California, and they're off to a great start. They're getting a lot of receptivity from previous clients who value the service and offerings
that the advice that they get from those bankers. And we also have our own ability to attract new customers. So we hit two and a half billion of deposits at the end of the first quarter. We're growing about slightly over a billion a quarter in deposits. We're opening a lot of new accounts. We're also acquiring some wealth advisors, so we did a lift out of a wealth team in San Francisco. We just announced Friday another team coming
in from Boston. So we want to have more choice to the customers in terms of wealth options.
Well, there's a lot to dig into there. I do want to start with it.
Sounds like you're hiring from your rivals to really fuel this expansion.
Yeah, so this is a fairly sizable bet for us. We kind of led one hundred and fifty people. World class talent came in on a day in June and we've got probably another seventy people. We've hired since then, two hundred and twenty people. And in a choppy environment where with the expenses we're going to show up day one, and the revenues and the customers we're going to come
in gradually over time. So we made that investment last year that was a loss for us, but then this year we expect to break even in the second half of the year, and then next year we should be significantly accretive, so it should boost our bottom line by about five percent.
And how important is the New York market? How much opportunity do you see specifically in New York City?
Yeah, so the New York strategy is more broad than just the private bank. But we went out a couple of years back. We bought HSBC's East Coast branches. We bought a bank in New Jersey called Investors Bank. We now have two hundred branches in the Greater New York area, about a number ten deposit market share, a million new customers. So you can start to see here in New York all of our green signage, and we're i think making a great mark on the city and raising our brand
visibility and we're obviously advertising on TV. You can see some of our spots. We're partner with the New York Roadrunners. You're going to be to see the Queen's Citizens Queen's ten K in a couple of weeks here. So great opportunities for us to bring our style of banking to New York City.
You're also doing TV interviews, which I certainly appreciate. But you mentioned I mean, you just rattled off a whole list of acquisitions that you've done, and it's interesting if you take a look at the landscape right now. I've had P and C, for example, talking about the need to do bigger M and A, to get bigger through M and A, And I mean, is that your strategy as well? Would you say that that you're pursuing a growth by acquisition strategy?
No, not necessarily. So I think what's interesting is all banks have different forks in the road that they can pursue. I think right now we basically we're describing ourselves as kind of a three legged stool where we have a transformed consumer bank, we have the best positioned commercial bank, and now we have the opportunity to build the premier bank owned wealth platform and private bank, and so you know, I think we have enough there to build a great
sustainable franchise. We're focused on that if opportunities arise down the road to potentially do acquisitions, will be prepared well.
Verus really enjoyed this conversation. Hope to stay in touch, of course, as you progress further on those efforts. Our thanks of course to PREsponse on of Citizens' Financial Group