So far in 2021, Citizens Bank has hardly been shy about going after the competition.
First in May, Citizens announced plans to acquire much of HSBC's US business, including 80 branches on the East Coast and all of the British bank's US online franchise.
Next up, Investors Bancorp.
On Wednesday, Citizens said it plans to acquire all of New Jersey-based Investors in a $3.5 billion deal, financed 90% in Citizens stock and 10% in cash, that will see Citizens take on more than 150 branches, 200 thousand customers and around $20 billion in deposits.
Together with the HSBC deal, the Investors acquisition will push Citizens into a top-10 market share position as measured by deposits in the New York metro area, a move Citizens CEO Bruce Van Saun described as a "one-two punch" on a call with investors.
Van Saun told Insider Wednesday that from Citizens' vantage point, the success of the two deals were linked together.
"As we were making progress in the bid process for HSBC, that's when I said 'It's probably time to pick up the phone and start a dialogue with Kevin whether there's something we could do strategically,'" Van Saun said, referring to Investors Chairman and CEO Kevin Cummings, who is expected to join the board of Citizens.
The bank already has roughly $151 billion in deposits, as of the end of the second quarter, ranking it 17th among US banks, according to the Federal Deposit Insurance Corporation. However, its branch network is focused almost entirely in the northeast. After the combined HSBC and Investors deals, Citizens expects to have some $180 billion deposits, ranking higher than Cincinnati-based regional powerhouse Fifth Third Bank.
"Today, what we really have is some national activities," Van Saun told Insider in June after the HSBC deal was announced, "but there's nothing that is a unified bank."
Citizens will pay a 2% premium on deposits — or about $180 million — upon the closing of the HSBC deal, which is set to be finalized in the first quarter of 2022.
At the time, Van Saun said the HSBC deal marked opportunity to manage a customer base that was previously underserved.
"The foreign banks tended to not have a full product set and to not become a trusted advisor to their customers, so it was more transactional in nature," Van Saun said in June, adding that 40% of the HSBC accounts were non-interest bearing checking accounts and the other 60% had "relatively modest rates of interest."
That leaves the door open for Citizens to move up-market into new offerings geared towards mass-affluent customers, since HSBC's online services "competed more on convenience than rate," he said at the time.
Citizens' future play with HSBC's online operations — which will roughly quadruple the size of Citizens' online bank, Citizens Access — is to lure in mass-affluent customers with a suite of offerings like checking and savings accounts, home equity lines of credit, credit products, and digital wealth advice, Van Saun said in June.
"You bundle that together. We can go to our existing customers, to the HSBC customers, and then just acquire accounts across the country and the mass affluent space," he added.
Citizens is eyeing a hybrid experience
Citizens plans to build an experience blending together online and offline services, Van Saun said in June.
Branches will be reshaped into "advice centers" and funnel transactional work to digital offerings and ATMs. The bank has already opened a wealth center in Palm Beach, Florida, soon to be followed by one in Naples and potentially Miami. The locations are valuable since "many of our customers are snowbird customers," Van Saun said.
Washington, DC, and Miami will serve as "a petri dish" to test whether relying on digital with a thin branch footprint will scale, he added.
As consumers lean into digital banking, regional banks have looked to consolidate. PNC acquired BBVA's US banking operations in a deal that closed June 1, catapulting the bank to be the nation's fifth largest.
"The pressure on smaller banks, and even these foreign banks, to actually operate in the new environment where everybody's moving to a digital-first business model and your tech, your infrastructure, has to move to the cloud – it's just putting a lot of pressure on smaller institutions," Van Saun said.
Ultimately, Citizens is looking to accelerate its tech spend and build "a true national online bank" with "instantaneous scale" that comes with the acquisition, he added.
"The mad experimentation period has commenced, and we'll be right in the middle of it," Van Saun said.
