Citizens Bank is expanding its commercial banking business beyond its primarily northeastern footprint into the West and South in an effort to boost its tepid profits.
The Providence-based bank is hiring an additional 70 commercial bankers, opening offices, or hunting for space in Washington, Atlanta, Dallas, Los Angeles, and Charlotte, N.C. It also plans to build its commercial lending teams in the 11 states in which it now operates.
The bank plans to focus on lending to mid-sized health care, technology, energy, aerospace, and defense companies, said Steve Woods, the head of corporate banking at Citizens.
“We’re trying to go after opportunities where we can be relevant,” Woods said.
Citizens, with 1,200 branches, has primarily been known for its retail banking business, taking in consumer deposits, offering home loans, and lending to businesses near its offices. But the low interest rate environment and increased regulation on fees has made it harder for banks to make profits on everyday consumers, said Jeff K. Davis, a managing editor and bank analyst with Mercer Capital, a Tennessee firm.
“This is part of a broader effort to diversify the revenue stream and shift the revenue needle,” Davis said.
Citizens revenues declined slightly last year, to $4.7 billion from $4.9 billion in 2012, according to financial filings. Expanding commercial lending is something that the bank should probably have done sooner, Davis said.
Citizens performance has been hampered in recent years by the troubles of its parent company, the Royal Bank of Scotland, which received a $70 billion bailout from the British taxpayers during the global financial crisis of a few years ago. RBS, based in Edinburgh, has yet to repay the British government and is spinning off Citizens to raise money to do that.
RBS plans to sell a minority stake in Citizens to investors in public stock markets later this year and eventually spin the bank off as an independent, publicly held company.
Woods would not comment on whether the initial public offering triggered the bank’s decision to expand its commercial lending business. The bank is barred by regulators from speaking about the upcoming stock offering.
Citizens has spent the past few years updating technology to help it expand its commercial lending and developing the expertise to bring other banks together to offer larger, riskier loans to bigger companies, Woods said. That process, called syndication, generates additional fees from borrowers.