Bruce Van Saun Shares Banking-Industry Insights

you're going to find this conversation to be quite interesting. Uh. Bruce is really a very knowledgeable and articulate UM spokesman on not only behalf of his bank, but the banking industry in general. He has a really good insight as to what's going on in both the industry and the economy. So I I found this conversation to be fascinating and I think you will also. With no further ado, my interview with Bruce van Soon. This is Masters in Business

with Barry Ridholts on Bloomberg Radio. My special guest this week is Bruce van Soon. He is the chairman and chief executive officer of Citizens Financial Group. UH. They were spun out from RBS back in where Van so On led a successful initial public offering. Previously, he had been executive director on the RBS board for the prior four or five years. Before that, he was vice chairman and

CFO at the Bank of New York Nellan. His previous career stints include Deutsche Bank, Washerstein, Perella, and Kidder Peabody. Bruce van Son, Welcome to Bloomberg. Thanks my pleasure to be here, Barry. Let's start at the Bank of New York and Bank of New York Mellon. Where were you during the financial crisis, which what was the name at the time. Well, I had left by then, so I

joined Bank in New York. In the biggest crisis I experienced there was when eleven hit and we were basically 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 One Wall Street was the headquarters building and the Barclays was Street was the operations center, 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 then we had to stand up a new data center with IBM's help in Sterling Forest,

So that was an exciting period. How long did it take for you guys to get back up and running, Well, it was it was a couple of days, uh, and then we had a lot of pressure to basically start moving money and move securities and clear out the backlog that had piled up for a couple of days. So you had backup facilities you weren't just that wasn't the sole location. It was relatively easy to turn but we didn't have the same kind of resiliency that banks have today.

So after in the wake of that, Bank in York went out and built a brand new spanking data center out in Tennessee, UM and so we're constantly ready to flip over, but we weren't at that level of resiliency at that time. The cloud has changed everything for banks and financial instation. I think the cloud is 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 offers some great promise to lower costs and also increased security and you were at RBS then in o eight oh nine is the yes, so so uh the reason I missed the crisis we had merged with Melon and uh 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

of oh eight. The crisis was in the fall of oh eight, so 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 then RBS came a calling. They had wanted to put a new management team in place to help right the ship after RBS took a tumble in the crisis and needed a government bailout, so I joined Stephen Hester. There I was the CFO, and uh we had a lot of surgery do in terms of shrinking the bank

and getting it back to safety. So you mentioned private equity. Citizens Financial is sort of a can I call them a middleware sort of bank does a lot of work with um not the giant entities out there, but a lot of very other large entities that I think are

a little below the reader of the public. Is that A yeah, So here's the you know, the kind of Laya the land in terms of our commercial business, so h, we focus on middle market companies, which are maybe twenty five million to five million in revenues, and then also the mid corporate segment, which is five hundred million to

about three billion in revenues. Over time since I've joined Citizens, we've taken the middle market customer a count from about two thousand up to about three thousand, and mid corporates we've taken from about five hundred up to about a thousand. So uh, we've grown faster at the bigger company end. Uh. 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, energy, uh, so they could 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. Uh. But we're not focusing on the household name. Fortune five companies were staying a little bit below that radar, and

we can compete very effectively against the mega banks. There's oftentimes we're leading deals and we'll have jp more going to be of a on our right or we're winning a swap transaction against the megabanks. So we have really good cape abilities, but we stay focused on an area that that we know and we can compete effectively. So I've noticed on Wall Street UM, hedge funds and venture capital seems to be going through a bit of a rough batch. But private equity just is a house of fire.

It just expands 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 well, uh, that we think they're good operators. Uh. They invest wisely, uh, and they're good to their banks and when they need to put equity back into a deal to right the ship if something is a little stressed, uh, they do that.

So uh, that's where we've stayed focused. We haven't tried to move and compete for all the business that's taking place there. And I think clients selection has been really critical. So those firms know us well, they give us the swings at the bat, they let us lead trans actions and then also provide more services to their investee companies.

So that's been a really good strategy for us, I would say, Uh, similarly with commercial real estate, Uh, 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 the bat when they're doing things, and I 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. So let's start with a really broad topic. Since the crisis ended in O nine, there have been just enormous changes 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 the period.

It's a very broad question, U. I'll break that down. So, you know, after the crisis, it was clear that there needed to be some reforms first around, i'd say the prudential regulation about how banks, uh, did they have enough capital, did they have the right funding and liquidity structures and

so um, where they're managing risk the right way. So we had a whole framework that was put in place that was agreed globally basically around capital, liquidity, funding, running stress tests, uh and I think that was really positive. So we learned a lot from the crisis and we put those lessons to use. Uh So a big part of our efforts early days was to make sure that we were keeping up with those increasing demands around the

prudent regulation. The second element of regulation was around really conducting culture, and so banks I think weren't always that transparent with their fees, and sometimes they were working against their customers that are working for their customers, so they're

needed to be changed there as well. And so that whole agenda came in in the second wave after the 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 to be the trusted advisor. We have to be working for the benefit of our customers, giving them good advice, being simple, being transparent on our fees. Have we come full circles when

we come a long way, you know. 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, so that yeah, I think that was it. That was a black eye for the industry,

and they're paying the piper for that. They now have a new CEO and they're working hard on their regulatory equation and it's been a great bank for deck 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. Uh, so the regulatory agenda was a big thing to keep up with. The second thing that's changed a lot is uh. You know, technology has moved in

warp speed to kind of dimensions nobody thought possible. So moving infrastructure to the cloud, UH, new ways of development around an agile framework which speeds things up. UH. Going to digital first business models, UH, using data to personalize

offers to your customers so they don't waste their time. Uh. You know, you see what's happening in other industries, and customer expectations for change and for a level of service have really increased given what they see elsewhere, and so banks have had to make the investments and go through significant change in the business model to 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? In his answer was security and hackers? How big a deal is that? And is technology helping us in this space or or making it worse? Well, um, to be in arms. I think it is a big deal.

And I think most CEOs of financial institutions trusted with keeping customers assets and data safe have to have that as the top issue on the priority list, top risk that we face. Uh. Fortunately, UM, there are advances in technology and new tools to actually help protect all of those those assets and that data. Uh. And you know, I think it also requires hiring top talent. UM. We

feel really good at Citizens. We've hired a leading expert in cybersecurity, has had some big jobs elsewhere, who um, I think, knows what good looks like and has moved us into the future very very quickly, has good followership, has brought a aditional good people into the organization, and then we've prioritized the tools that she needs to really

keep the banks safe. So that kind of goes right to the top of the capital expenditure list, and I think that will 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 a water pistol and pass a note to the teller anymore. That's less and less the way that Yeah, it's it's

you know, much more sophisticated. Now they're sitting in a you know, in a cafe, hacking away, buying you know, data off the black market, and trying to figure out ways to to steal people's assets. Unbelievable. So you lead the I p O in what was that process like going public? And how happy are you that you're not, you know, a tech unicorn having to face what companies like Uber and well, look, I think citizens had that

great foundation serving a good part of the country. Because of the troubles of the parents, 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, and so there was work to do when we had the deadline in terms of taking in public. The best I could do really was assemble a strong team and board, uh, 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 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 buy the promise. Uh, and by our experience and our vision felt really good. So that was that was important to get that done

and launch that. UM. I would say, you know the experience of going public really helped facilitate our turnaround because uh, usually UH divestitures banks get sold, they don't get I p oed. So this was opportunity for me to assemble a 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 gonna 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 when you win with talent. Uh So that was that was really positive. I think the other thing also is that it kind of shook up the culture at citizens that as a sub of a foreign entity that has its own troubles, you could get comfortable

and a bit complacent. And so 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 to towards that path. Uh And so we had a higher level accountability that we embedded into the culture. Uh So we're accountable to shareholders and we're accountable others to serve our customers better and to run the bank better. So you sit on the Federal Reserve Bank of Boston

board representing other banks, what is what is that experience? Like? Oh, that's great? Uh So? Uh if you if you flash back to the last two years, I was on the Federal Advisory Council. So I was representing the the Boston Fed District in meeting with the FED Board of Governors and talking about issues and making uh you know, giving color on economic conditions and offering advice on certain financial matters.

So that was good. And then I rolled onto the to the Boston Fed and so we talked about the economic conditions in the New England region. Uh, we talk about the macro economic dynamics and where interest rates are and where they where they should go because uh, you know, the Boston Fed president gets a vote in terms of what to do with interest rates, so you're an influencer of him, but not a voting member obviously, yeah, obviously. Yeah. So quite interesting. And you're on the board of Moodies

for a couple of years. This is post crisis. Yeah, what is that experience? Well, you know, you missed all the fun. Well what's interesting is, uh, you know, most ceo s can have one outside board slot. Um 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's board. That's

quite the entity. And I found that, uh, you know, would complement what I was doing as an executive because their specialists and risk management, that's our principal responsibilities to make sure we're running a safe and sound institution. And so when I came back from the UK and came into the US. I was looking for a job that would also be complementary where I could continue to uh stay in tune with the latest developments in risk management and kind of seeing the lay of the land about

how Moodies thought about global risks. And so that was just a natural thing to for me to go from Lloyd's of London go onto the board of Moodies. 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, I think Moody's paid a million dollar fine. SMP paid billions and billions in finals, and it wasn't quite that much of a spread. I think SMP billion settlement with the with the d J was about a

billion three and Moodies was about eight. That they were ultimately but they but they pretty much seemed to have gotten much less blame in the popular press than SMPA. I I don't know why that is, but uh, you're you're this predated you by yeah. I mean we had that we that we settled while I was there on the board, so we got involved in looking at the facts and looking at the allegations, but I do think Moody's fact pattern generally was was in pretty good shape.

But still there was some some culpability. 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 preparing for this, I suspect you're the 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 and get on with all. Well, I'm just I'm just one board member.

But yeah, we had those types of conversations. I can imagine that the market is really focused on the future. They don't like to have these overhangs on the past, and so you just gotta put them behind you. Let's talk a little bit about Apple. You know, when when I first started um reading about citizens Financial, my initial response was why is that name so familiar? And I just punched it into the search of my computer. It's like, oh, they finance are our iPhones? UM, tell us a little

bit about how did that come about? What? How I know that's a relatively minor UM thing in the overall revenues of the bank. But it's kind of interesting because it is a name brand, and you guys are pretty much very public with 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 we're

quite pleased that we hold that position. Uh. You know, we had worked with Apple early days when we were building up our student loan business, uh, potentially with a 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. Um, 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. Uh. And I think we built a very effective platform to

process those transactions. So there's a very small window of time that as you know, since you've in it twelve months, well, but you go into the store, you pick your phone, and then you, 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 a very good credit decision ing model and then a very good processing capability behind the scenes that leads to a very good customer experience, a very

highly rated NPS within the Apple store experience. So, uh, anyways, pretty instantaneous. Yeah, it's it's gone exceptionally well. On on the days when they launch a new uh phone. Uh, we get massive volume that we have to process, and we've always been able to flawlessly execute all that volume.

So so I think it's been a good partnership. And Uh, the nice thing is the technology platform that we built for Apple, we can move and offer it to other merchants and adapted to to the needs of other merchants. And so today we also have a d T and vivin to 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 this space, because we're gonna announce a

rollout to some other very highly regarded companies. So I'm curious as to how this works because when the first time we went to an Apple store too, and I'm always complaining I'm a power user phones and after a year the battery life starts to die. The last phone, I replaced the battery at month fourteen, and I said, wait, twelve months, new phone? What do I sign up for that? It was a pretty surprisingly quit. You punch a bunch of things in data birth so, 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, etcetera. What what how many data points go into that that it could be that's a number of data points. We don't want to give away the full secret, Sauceberry, but you know, I think we feel quite 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 vintages, uh, and they've performed at or above expectations. Do you tweak this on an ongoing basis? It's always how do we make it a little better and 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 just a giant fire hose of

data or there's there's a big swell of volume. Uh and uh. 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. And despite the price, it's pretty expensive. Well, they've had had a two tier price, so I think, and you could get the eight for a very cheap. They've now covered the full spectrum of prices as opposed to just being 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 gonna 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 ideal client for you, guys. We walk in, what's the biggest phone, what's the top of line? Give me extra storage? Wait it's fifty bucks a month, Okay, great,

we'll take two. It really is a very simple thing, and the only problem is you want to upgrade after a year, and sometimes you're waiting a couple of months for new phone, so you end up holding onto it. But then but you're never really obsoletely, you're always getting the latest and greatest, which after the very appealing. Well,

some people don't care, other people want whatever. The most buzzworthy thing is I am an early adopter, even though it can occasionally be painful when you buy things before they're really ready for prime time. UM, thankfully I passed on the Google Glass. But any time I have an opportunity to upgrade the phone, I'm I'm, I'm there right away. Good.

I have to think that where you sit in the economy, looking at consumers, looking at other um businesses and entrepreneurs, you have to get a really early 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 of the country. So we have New England, mid Atlantic and Upper Midwest within our footprint, three very different economies economies, and we cover, 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. So the balance of our businesses is roughly fifty fifty between uh corporate and and also uh the consumer.

Uh so we get it. We got quite a good read on uh, you know, both data in terms of, you know how how are borrowing patterns, how our charge card usage, etcetera. Uh, and then also anecdotes just what are we hearing from customers? What's the businessman doing? Are they buying that next piece of capital equipment? Are they holding back because of the trade tension? Uh? So, I think 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 first? Is it in spending patterns? Is it in payment patterns? Where? 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 is credit deterioration. 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 dress a little bit. And so to me, that's a key early warning sign. Are you seeing any of that today, We're not. So. There was a Wall Street Journal article about middle class consumers moving towards a seven year versus the old five year UH loan for automobiles, and that could be a sign of of something I don't.

I think people maybe you're holding their cars longer. That's a little more affordable to stretch the payment out over a longer time. So and these cars now less pretty much, they do, they do, so you're not seeing a lot of people have been nervous about I s M and I've been nervous about residential sales. And you know, the recession easts have been forecasting a recession next year for the past five years. They you know, eventually they'll be right.

But it doesn't mean we don't. We don't see it. Uh, you know, I I'd say, uh, there's some recent data that UH manufacturing sector is a little soft. But you have to remember in the context of the US economy, economy's power s by consumers, and consumers are in great times. Unemployments low, people can find jobs, real wage growth, So you've got UH wages growing at three point two, inflations down at one and a half. So people are having

expanding uh net pay over inflation, which is great. So that 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 to that. It's been around for a long time and it hasn't 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 sitting there saying, how is the trade tension and the tariffs going to impact me? And it's going to impect impact different sectors differently. Again, the service economy is not that impacted by it, but the manufacturing sector is. And fortunately for us, the service sector dominates our to me so, but you guys have have offices in the Midwest.

You're seeing stresses starting to perform on at least on a small basis. I think. I think a lot of companies are thinking about their supply 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 do, including the banks, is how do you get more efficient if you're going to have these costs that come in from external from uh some of the administration policies.

Then how do we protect our growth and our earnings, etcetera. And so deploying artificial intelligence, deploying robotics, finding ways to keep streamlining how 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. 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 a middle market bank like yourselves. Yeah, well, it's uh, certainly move something that's been a tailwind for the last two years. Its rates were going up. Most banks are what's referred to as assets 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 reprice your deposits.

So it puts a little pressure on your net interest margin. Uh. Certainly, you try to hedge that to some extent, but you are going to have an impact, uh, and NIM 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 going to 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 we've purchased two M and A boutiques to broaden out what we can do for our customers, and there's still been a good flow of M and A opportunities occurring in

the middle market. We bought a mortgage business, which timing was great on that because as rates go down, as the FEDS cutting rates, it maybe crimps your NIM a little bit. But NIM 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 places have you re financial mortgage. I literally was there Friday doing the paperwork and the numbers are just insane. So so to eight on a ten one mortgage and

I'll have my mortgage paid off in ten years. I don't ever have I know, I can't recall having heard of rates that low. I I want to say, a thirty year fixed was three five or three three and a half. Yeah, these are just these are These are 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 fortunately this quarter we're going to have a really strong third quarter UH on the feet side, which will offset any of the leakage that we see on the balance sheet income side. UM. And then the last acquisition that we did was we bought a high end wealth advisor because what we found is in the corporate side, the business owner the fourth generation UH family that is very wealthy and occasionally takes out large dividends from their company and

puts that back on the company. We weren't getting the swings at the bat to manage those assets or to do the estate planning for the company, So the folks out of 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 Clarfeld Asset Management, which is a highly respected wealth advisor and based in Terrytown, New York.

And so we're now able to offer those services. So, uh, really not trying to 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, yes, so that that that's a good thing, is um? So you you mentioned the FED pausing and starting to reverse itself. Obviously mortgages

rates make it a big difference. How how did Quewie affect the rest of your business and and how does all the noise which seems to have faded along with the summer about the President and the FED doing battle, how does that impact what you guys do? Well? Um, 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

in a material way. Uh. Quantitative easing I think was a stimulative measure which basically the FED was building up their balance sheets, so taking on securities and buying those with cash and putting cash back into the system. So it helped promote liquidity and deposit growth and promote lending. Rates came down as they were buying those, uh, the long end securities. UH. So you know, we just have

to be in tune for where the FED is going. Uh. And when we do our forecasting, we do our business planning, we run a bunch of different scenarios. Is that you know what happens. If this is happening in the economy, then what is the FED likely to do? Uh? But uh, in any case, we we just need to be flexible and adapt to the circumstances that we see. So I mentioned diversification, and you mentioned are in the southeast, Northeast,

and midwest, so Boston, Philly, Pittsburgh, Providence, Detroit. Um any thoughts about expanding elsewhere are you eventually gonna Well, there's a couple of things. So on the on the corporate side, Uh, as we moved to the mid corporate space, which are slightly bigger companies five undred 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 sun Trust and 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 fellow to UH pull together our team out in California, So he's going to be based in l A. And so UH, you know, we'll be on from a corporate bank 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 conser sumer side, we've attacked that our consumer lending operations are national, but UH 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 online only focused on savings products. After a year, we now have five and a half billion of deposits

UH 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, we're abul tract deposits. But what else can we do for those customers? And what else can we do for many of the customers we've now assembled through our lending products who might be thin relationship customers. They may know us like you may know us because your Apple loan is with us.

But could I come to you very digitally and offer some things in a bundle to say, hey, that mortgage refinancing do it with us? Or uh, other needs that you might have, how to how to manage your your wealth portfolio. We have digital tools that would allow you to do that and be pretty true to how you do it. So uh, that's kind of the next phase for us is we probably don't want to have branches outside of our traditional footprint, but we can I think

attack the national market digitally. What you're seeing that's very interesting. There's a lot of experimentation going on. So the megabanks like JP, Morgan and ba A are saying we're going into all these new cities. They're actually not increasing their branch count, their thinning branches where they're thick and they're putting them if Chase has a big customer base around their Sapphire card in a 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, and they're putting thin offices. They've got three in Kansas City, they're putting ten or twelve in Dallas, and so everybody's attacking this a little differently. We want to get our brand out there. We want to be more national in scope. Do we need the branches or do we not need the branches. That's one of the key questions that will kind of in the peatree dish right now, we'll see how it

plays out. You mentioned super regionals. We seem to go through these cycles where suddenly the majors are acquiring super regionals left and right, and then we enter a lull for a couple of years. What do 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 and a um landscape for the mega banks and the superregionals. Are we done with rolling up for now

or how does that change? I think I think the mega banks, most of them are at the deposit cap, the national deposit cap, so they're really not players that can't play. You did see in the superregional space murder of equal between bb and T and sun Trust, which I think was fairly unique. It created a Southeast champion uh and I don't think the other superregionals 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 a merger could be a distraction. So if we can be flexible and 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 in the super

regional space this year. But I think the smaller banks, who really have to contend with all of the cost of that new technology and some of the costs of regulation, even though the regulators are trying to give them cut them a little slack. I think there's an impetus to see the smaller end of the market continue to consolidate. We had an issue post crisis, or at least compared to pre crisis, a lot more mega banks a lot less competition, more of the national assets held by fewer banks.

Is that an attempt to sort of resolve that issue? Or 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 hous and depository institutions in the US. Five years ago it was seven. Today it's like five, and so you're just seeing that inevitable consolidation because we still have, I think, much more fractured banking landscape than any other country. We have been speaking with Bruce van Son. He is CEO

of Citizens Financial Group. If you enjoyed 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 your finer podcasts are sold iTunes, Google, Stitcher, Spotify. We love your comments, feedback in suggestions right to us at m IB podcast at Bloomberg dot net. Give us a review on Apple iTunes. Be sure to check out my weekly column on Bloomberg

dot com. Sign up for my daily reads at Ridholts dot com. I'm Barry Ridholts you're listening to Masters in Business on Bloomberg Radio. Welcome to the podcast. Bruce, Thank you so much for doing this. I um, it's always funny when I see different names. 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 who Steve Jobs was not, everybody knows who Bruce

van so On is. And yet you're impacting what what people do. So I was I was looking forward to this. There were a couple of questions I did not get to that. I'm going to try and run through now and then we'll we'll do our favorite questions and we'll get you over to TV on time. UM. Oh, so you guys went public in I've, I've. We have all heard lots of folks complain about the I P O process and how difficult it is being a public company. How does that square up with your experiences running a

private company and then taking it public. Yeah, so you know, I actually, um, I think it's been very positive for citizens. Part of it is where we came from. Uh, we had to turn around the bank and so having UH an interested investor community and twenty two cell side analysts focused on us and prodding on our long term strategy and putting estimates as to how fast we could turn around the bank. UH. It's certainly raised the level of

accountability and I think our ability to execute improved. UM. You know, when I when I think about the trade offs, people say, well, 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. UM. 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 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 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 UH and trying to grow the bank so that we make it stronger five years from now and ten years

from now. So all the complaints about how um onerous being a public company is and the threats from activist investors, is that all overstated? Or what do you think? Look if you if you run the company well and you actually think through an activist agenda, Like what am I missing in terms of 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? Actually, you can proactively anticipate where they would where they would make suggestions, and just get ahead of it. And and you know, it's helpful to to kind of keep that mindset. It insulates you from attack if you're beating them to the punch. Yeah. Interesting, I mentioned you're on the Federal Reserve Bank of Boston as well as the board of directors at Moody's. There were two other things I want to mention because I

think they're both 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? Uh, tell us a little bit about that institution. So the Bank Policy Institute is a relatively new creation with a long history and legacy organization before it, which was originally the Banker's Round Table, which became the Financial Services Round Table. I think, Uh,

what's the correlation between this and the fincial. So now bp I has effectively succeeded the Financial Services Round Table, 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 Banker's Roundtable, it was just bankers. Then it was financial services and so asset managers and insurers all got together and we would have meetings and interact, you know, on policy and talk to folks down on

the hill. A lot of the meetings would be in Washington. But you know, over time, I think the agendas of

the different subsectors were different. So under Brian moynihan's leadership, who runs b of A, was determined that the banks should split off and keep a kind of larger bank profile minimums asset size twenty five billion would throw into this Bank Policy Institute H and effectively work on policy matters and things that impact the economy and have an ability to you know, effectively operate like a think tank, put out papers and monitor what the FETE is doing,

and respond to request for proposals from the regulatory agencies, and have an ongoing dialogue with members of Congress. So they were informed on financial issues that impact the real economy. Quite interesting. And then you are also a board member of the Partnership for Rhode Island and Jobs from Massachusetts. What are 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 uh states. UH, you know drive pro business and and pro growth and pro jobs agendas. UH. And so the one that uh uh we've had some really good traction, in particular with Partnership for Rhode Island, where we've focused on education UH and and uh also business attraction and transportation, which are

important to improving the Rhode Island economy. UH. One thing we did recently is we funded the Johns Hopkins Review of the Providence school system, which I don't know if you've seen that. It caught a lot of national press, but basically was pretty damning of the state of the school system. And uh, now can you say that in pretty much any school system, but some are better. This was this was really kind of pretty low down the

totem pole and there needs to be changed. And so the state's going to take over the administration of that school district and I think make the changes that will 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, uh, those things feel good. Um, you know, working in collaboration with governors and with the government to to you know, bring business, uh influence and money behind 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 of and we saw a little bit of this with the Amazon headquarter bake off, but we've seen this sort of tendency to give the store away in order to attract specific companies as opposed to just creating an environment that is helpful and easy to operate in for businesses. What do you think of those It's almost like a race to the bottom. Ester a big proponent of that. And uh, you know,

we had an opportunity. Um. A couple of years ago, we had a fork in the road. We had a very large least facility in the Greater Providence area and a couple other smaller leases. That meant people were uh you know, kind of going to roll off their current occupancy and we can 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 a

little west of Providence. We've got people there, four square feet uh beautiful campus with sports fields that we share with the local community, walking trails through the woods. Uh. 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 want to be, this is where our history has had us,

and we have a great uh colleague base here. Uh. And so you know that I think the government was helpful in getting things we needed, like an exit ramp off of the highway into our campus, for example. So the work isn't that what the state or the local city is supposed to be doing as opposed to tax give away right, so that we we split the cost with the state, so we paid half and they paid

half for that exit ramp for example. And you know some of the some of the locals are alreadis put sewer lines in and on an expedited basis so we could get the campus up and running. So uh yeah, I think it was it was the right thing to do, and we didn't have our hand out. I have some NFL team owners I'd like to introduce you to. Maybe you convince them to stop being socialists and actually embrace capitalism. You own a football team, build your own damn stadium.

I know that doesn't win me any friends, but it just seems like a reasonable thing to do. Um. I just was reading, uh the Cleveland Cavaliers. Their stadium needs an upgrade, and they're asking the taxpayers to pay a couple hundred million dollars. You're a billionaire, fix your own stadium. Leave us out of it it. Uh. I can't. Obviously, I'm not going to talk about anything in Boston sports as a New Yorker. I I just don't even want to go there. Um. 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 us the first car you ever own, year making model uh Ford Mustang to four. I was 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 a difference. We paid for that car, and so when I got my license, I was driving a brand new car. So wait, you bought that car before you actually had it was the model year was letting out or something, so my father thought he could get a deal on it. So but I pick it up at the end of the year, had from working summer jobs, so I put up my share that that's great. Um, what's the most important thing

people don't know about? Bruce Van so on? Um, I you know, one of my early jobs was as a landscaper, summer jobs to make that money for the car. Uh and I still love to garden to this day. So I take great pride in designing a nice landscape and then maintaining it. Uh. Tell us about your early mentors who helped guide your career well? Um, I I always mentioned my parents because I think they gave me a

great foundation and moral compass. But uh, you know, 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. Uh. And then I had some great people that I worked for. UM. I 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 a lot from him. He was very decisive, worked for Bruce Wasserstein, one of

the smartest shows on the planet. Uh. He had There were a lot of Bruce is ms that I picked up in a out of wisdom. And so I always found that if you want to you know, move ahead in a career that your you should look for great people to work for that you can 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 uh to bankers that I would call out? Tom Rennie 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 hand be inflappable under all kinds of scenarios. Um and uh 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 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 RBS UM who was under a mense pressure to get RBS righted, but uh just was so unflappable under all that pressure. Um and again keeping that even keel, um and uh just super super smart, really good thoughts about how to go about that turnaround, which some of those things I've I've applied to citizens on a smaller scale obviously than URBS. What about books? Tell us about

your favorite books. What do you enjoy to read? I read a wide uh range of books, read a lot of business books. Uh, I read uh you know, Tom Clancy, Harlan Coben, those kind of books. Probably the the book that's had the biggest impact me my whole life was The Power Positive Thinking by Norman Vincent Peale. Uh So, I was a giant that really positive attitude, which I read probably when I was in my early twenties. Uh So.

I totally enjoy reading. Unfortunately, I have I have so much reading to do for work in such an extensive seven have work agenda that I don't read as much as I could. But I've still probably read a dozen 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. Um, I can't I don't remember the title, but it was about an elephant trainer who basically lead these elephants 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 in World War two. Elephant Company there is let me get let me see if I can read the exact name. That's wild by

Vicky Croake. Elephant Company the inspiring story of an unlikely hero in the animals who helped save him lives in World War two. Wow, that's quite quite fascinating. Tell us about a time you failed and what you learned from the experience. But by the way, a thousand nine views, five stars, that's pretty that's pretty impressive. That was a good book. So you might want to put that one on your list. Yeah, I definitely will um tell us about a time you failed and what you learned from

the experience. Uh, you know, I I'd say getting cut from a sports team was kind of a big moment for me. I was a tall sport. Did you play basketball? I played baseball, basketball, 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. Uh, and I really I 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 a travel basketball team and we played. You know,

we had 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 that's great revenge. That's a little bit of Michael Jordan's didn't make He was a freshman, he got cut h and he used it as motivation as well. What do you do for fun? What are you still playing hoops or no more? Nah, It's it's a little risky at

this stage. But you know I still enjoy sports, so golf, tennis, swimming. Uh. Like to go to the beach. Uh. You mentioned your sail Yeah. I was a commodore at our at our sailing club, so I love the water. Um. And you know, like good dining, going out, having a good time with the family and friends. Um, well you got plenty of 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, um, you know, when I look at at this country, the US, that that we serve, that citizens serves, I think it's the greatest country on the planet. Um. And uh, you know, we have our troubles, we have our challenges, were not perfect, but over time we've continued just to I think get it right. Uh. And we're 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 nineteen fifty nine thousand. Just think where it's going to be going forward. So I'm optimistic about that. Um, I'd say the things that I'm disappointed in are 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 and angry and not step back and say, gosh, look look what we have. Uh So, anyway, I think we've lost our soul a little bit. We've lost our spirituality, which I'd love to see that rejuvenate at some point. It does seem that people are a little more divided,

a little more angry. It's it's some of its social media, but some of it is just you know, this 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 and A and a world war before people seem to resurrect that can do American spirit. Um So a millennial or I'm gonna say that again because I have to drop millennial because they're too old now. Ah So, a recent college grad comes to you and

says they're interested in banking. What sort of career advice would you give that. I tell them it's a great career, and uh, you know what I love about it? I think it's a noble profession. So I tell people, Look, you get to positively impact people, individuals, uh, communities, local economies 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 and further that

impact on local communities. And so for example, Citizens Bank, when I joined six years ago, we were volunteering about fifty ours. We really had to focus on upping that and today this year we're gonna hit about a hundred and fifty thou volunteer hours. We have seven people serving

on local boards around our footprint. And so, uh, if you want to have a career where you can learn be challenged constantly evolving landscape that you have to contend with, but Importantly, you can positively benefit the people that you live with and the local communities and economies that you live in. Banking is a great career. So normally I don't ask follow up questions in this segment, but you just made me think of something. Not too long ago,

the Business Round Table change their perspective on UM. The end goal of the corporation is maximizing shareholder profits. They now look at it as there are many different constituencs UM and that that' seems to have been a pretty large sea change. What did you think of what? It sounds like you've already adopted that. What did you think of this? Well, if we we, I think it's been a little controversial because ultimately you're working for your shareholders.

You know, management is an agent for the shareholders of the bank. I think all those uh different stakeholders work together, UM. And so you're trying to deliver for customers, for communities, uh, for your colleagues, the three c's. If you're regulated, you gotta run a business the right way for the regulators. You've got to deliver for the shareholders. You want to 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 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 acts. If if you're not pleasing, you can't go pursue your own agenda and make the other stuff more important and then see the stock not performed well, in the bottom line not performed 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 ago? Um I. I think it's just a cumulative process where you go through life and you learn things. UM I don't. I don't have

any ah ha 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 fashion. They have to be focused on delivering for customers. Um 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 thing that I said, God, I would have run my career

differently if I knew it back then. I think I've just, you know, evolved with the changes in the industry, and I think I have a pretty good concept of what banking is 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 van so On. He

is the chairman and CEO of Citizens Financial Group. If you enjoyed this conversation, well look up an intri down an inch on Apple iTunes and you could see any of the previous two hundred and 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 right to us at m IB podcast at Bloomberg dot net. Be sure and give us a lovely review on Apple iTunes.

I would be remiss if I did not mention the crack staff that helps put together these conversations each week. Karen O'Brien is my audio engineer. Michael Boyle is my produce your slash booker. Michael Batnick is my head of research. I'm Barry Retolts. You've been listening to Masters in Business on Bloomberg Radio. H