- key insights: A major regional bank in the U.S. is reducing its involvement in mergers and acquisitions.
- Future outlook: They seem to see significant potential in their current operations.
- expert quote: The bank’s CEO mentioned, “we’re experiencing very strong growth” internally.
update: Comments were made by Citizens Chairman and CEO Bruce Van Saun during an interview with American Banker on Wednesday afternoon.
While local bank mergers and acquisitions are picking up pace, top executives at some of the largest regional banks expressed little interest in either buying or selling.
The $222.7 billion asset bank plans to focus on expanding its private banking sector, which has been growing for two years, rather than pursuing new acquisitions, according to Chairman and CEO Bruce Van Saun during a conference call discussing third-quarter results. He added that the bank is eager to capitalize on its investments in commercial banking.
Van Saun, who has led the bank since its inception, indicated that pursuing acquisitions isn’t a priority right now. Instead, they’d rather utilize their extra capital for stock buybacks; they repurchased $475 million in common stock in the first three quarters of this year.
“We are experiencing significant growth,” Van Saun stated. “While we remain alert to opportunities, pursuing acquisitions would require meeting a pretty high bar.”
Recently, the establishment of Fifth Third Bancorp in Cincinnati marked a notable development in local bank M&A, as they announced the acquisition of Dallas-based Comerica for $10.9 billion, the largest bank M&A deal in four years.
This adds to a trend seen this year, with a total of 135 bank M&A deals revealed from January 1 to October 6. Comparative figures noted include 129 deals in all of 2024 and 102 in 2023, according to Seaport Research Partners analyst Laurie Harfner Hunsicker.
Van Saun acknowledged differences in M&A strategies during Wednesday’s call, pointedly noting their private bank’s contribution of 8 cents to earnings per share in the third quarter, up from 6 cents the previous quarter.
“We aim to continue growing and performing at high profitability levels,” Van Saun expressed during the conference call. “That’s where our focus lies.”
In a follow-up interview, he conveyed satisfaction with the bank’s current scale and growth prospects. He emphasized the importance of which areas to focus on, specifically private banking.
“Being at our size affords us a unique position to connect various capabilities across the bank, allowing us to offer compelling solutions for our customers,” Van Saun elaborated. “We really don’t need additional scale.”
The bank reported a net income of $494 million for the quarter, a 29% increase from last year, with earnings per share at $1.05—slightly above analysts’ expectations of $1.03. Total sales also rose to $2.1 billion from $1.9 billion during the same timeframe last year.
A boost in the private banking sector contributed to this increase, but notably, it was the commercial banking division’s capital markets business that stood out, yielding record fees attributed to M&A, debt assumption, and loan syndication.
Overall fee income climbed 18% year-over-year, reaching $630 million while net interest income increased by 9% to $1.5 billion. Operating expenses grew by 7% to $1.3 billion, influenced by elevated salaries and expenses linked to private banking and capital markets.
Looking ahead, the bank is set on driving profitability higher. They aim for a return on tangible common capital between 16% and 18% over the next three years, with the latest figures at 11.7% for the third quarter.
The bank shared few particulars about their recently announced multi-year cost reduction plan, dubbed ‘Reimagine the Bank’, which intends to harness AI and other technologies to enhance customer service.
Brendan Coughlin has been promoted to president and will lead this initiative going forward. Full specifics will be unveiled during the fourth-quarter earnings call in January, as noted by Van Saun.
In recent leadership changes, Don McCrea, who heads commercial banking, plans to retire by March 2026. Ted Swimmer, previously head of capital markets and advisory, will step into his role, while McCrea transitions to chairing the commercial banking division until he retires.
Van Saun mentioned that the bank has been preparing for McCrea’s exit and highlighted the recent changes at the executive level, stating that Anoy Banerjee has arrived from Barclays Bank PLC as the new CFO. This younger team brings fresh leadership potential.
In discussing his future as CEO, Van Saun indicated he remains focused on ensuring a robust new management team is in place to navigate the bank’s future effectively. “If the team is strong… I’m ready. But, of course, timing is everything,” he reflected.
