We've been talking a lot about the election, but before we get there, runners will be off to the races this Sunday at the New York City Marathon, and for the second consecutive year, Citizens will be the official bank of the race. The bank has also announced a one hundred thousand dollars grand to help improve green spaces in the city. For more on the race and the future of Citizens, I'm pleased to say we're joined now by Bruce Benson. He is Citizens Financial CEO. Bruce, it's great
to speak with you again. Interested to see, of course that you're sponsoring the marathon for the second year in a row, and it really lines up with this push that Citizens has made into New York City in particular. Where are you on that tell us about the progress that you've made in New York City.
Yeah, so we have been at it now for two or three years in New York and.
It's been really going well.
So I would say when we look at our regions, it's the fastest growing region that we have in the system. We're growing households at kind of mid single digits and we're growing deposits at mid to high single digits. But it certainly is an expensive market and there's a lot of competition there, so we've looked for opportunities to elevate our brand, and partnering with New York road Runners and the New York Marathons such a distinctively New York experience really has been beneficial to us.
I want to get to the rate environment here, Bruce, because the FED is starting to cut obviously looks like they're going to continue. Is that bad for you? Net interest margins is something we instantly think about with banks because obviously, especially a local bank will make all of its money or the majority of it, from getting more on loans than it pays on deposits.
Yeah, so it's a little complicated.
Actually, the banks typically are benefited from higher rates, but we have different strategies to cope with lower rates, including hedges. So I'd say we're pretty neutrally positioned at this point. I think that there's other benefits from falling rates, and you'd have to take into accounts. So first is it'll stimulate more loan demand, so you'll get the volume effect
that will be beneficial. You also stimulate deal activity, so capital markets fees should kick in more, and it's beneficial to borrowers, particularly the more levered borrowers like commercial real estate owners, will have a chance to refinance at more attractive rates, So that'll be good for bank credit costs.
So you kind of have to look across to all of the different ways that banks perform, and lower rates I think are going to be beneficial, and that's one of the reasons bank stocks have been performing recently, well, last thirty days or so.
You know, Bruce Wee, we have right now price of your stock over the last one year surging about eighty two percent. Clearly investors look to citizens as a place of stability here in a regional banking market where there are a lot of other concerns. We have an amazing story on Bloomberg right now about how for the first time since the Great Financial Crisis, buyers of top rated commercial mortgage backed securities are suffering losses with triple A
bonds going bust. How much more pain is there in parts of this real estate market, especially in some of these big cities that you're keeping an eye on, And what might it mean for the industry.
Yeah, I would say, you know, all real estate is local, so it certainly depends kind of where the properties are located and what the tenant structure is.
If it's an office.
Location, office is really the area that has to readjust so there has to be some losses recognized. You have to take some stock out of circulation and basically get supplied back to equal demand as companies need less office space given the slow return to office trends and the kind of permanence of hybrid work arrangements.
So that's going to play out gradually.
I think most banks are well reserved for their exposure there. We feel we are, so I think it's not big on the worry list these days from investors in bank stocks that they've seen banks get.
Their arms around around around most surprises. Currently. It is tough on the office segment, but banks are working work it.
Yeah, it seems definitely like investors have found other things to worry about. To your point, I want to talk a little bit about private credit here, private capital. It's an area that you've highlighted as a potential opportunity for citizens, especially when it comes to leverage lending.
There.
Where are you on that journey? How do you differentiate from some of your peers, particularly in the regional space.
Yeah, so we've been focused on private capital for a long time, so starting with private equity sponsors who increasingly own more and more of middle market companies in America. So you want to be able to service them, You want to be able to show them deal flow, you want to be able to finance their transactions. So I
think we're very well positioned for that. The more recent emphasis has been on private credit, so as the private equity folks look to expand their overall complexes, they're getting into private credit and there's direct players in private credit, and they're looking to finance more leverage transactions. In some cases they're disintermediating banks, but in many cases banks don't play at that end of the leverage spectrum. So banks are looking to see how can we serve those players.
They need credit themselves, so can we lend to their fun complexes in a safe and secure way. And I also think that we've developed good relationships there and we're also having opportunities to lend to those complexes.
So net I think we're positive.
As opposed to it being a worry beat in terms of kind of opportunities leaving the banking system.
Right, Well, that's exactly where I wanted to go because it seems like private credit that industry, in the banking industry are kind of frontemies at this point. And my question to you is going to be have you seen private credit encroach on your territory? But just to crystallize your point, it sounds like you're saying no, Yeah.
I mean, there will be some deals that we lose but at the margin, But for the most part, we're playing in our sandbox. They're playing in a slightly different sandbox, and then they need banks to make their strategies go, so you have to turn that kind of risk into an opportunity.
I'm curious as we get into this part of the cycle, when we get into a regular way bank lending to consumers as well. Brus, I'd love for you to comment, we saw a consumer sentiment really start to tick up once again. Do you think that this could be a bullish signal for ANII and lending moving forward? Do you think people are ready to take on debt to start spending.
Well, I'd say there's a couple of considerations there. One is, the higher rates have been an impediment from people wanting to borrow, so as rates come down, that'll stimulate, I think more more borrowing and lending. The other aspect has been uncertainty, and so I think more broadly in the economy, the election coming up and the prognosis are we going into a soft landing? Are we going into a recession?
I think the more we see clarity on that we get through the election, we have a better census to is the economy holding up? It seems like it is. That gives people more confidence. So I would say the two things, less uncertainty, more conviction on the path of the economy, and then lower rates. The combination all of that should mean that there's going to be more loan demand as we head into twenty twenty five.
All right, Bruce, great to get your take on these issues. Great to have you on the program.
Thanks so much for joining us.
Bruce.
Fans on there of citizens Financial group. And are you gonna run the marathon? No? Does either one of you run?
I do have I can't do more than that.
I know you run marathons, right.
Well, I was a middle distance runner in college, so I like to keep the races shorter.
All right, we're they're saying, yeah, I like to keep my race is very short.