Citizens Bank pursues national ambitions

Citizens Bank’s 11-state retail empire hews close to its New England roots, with no branches west of Michigan or south of Delaware.

So what was the Providence company doing sending one of its top Boston lenders out to sunny Los Angeles to open a new office? It’s all about the Benjamins, of course.

To grow outside of its branch footprint, CEO Bruce Van Saun has avoided buying more banks — and the headaches that come with such deals. Instead, he is looking at other ways to expand: launching an online bank (Citizens Access), buying a mortgage company (Franklin American), and turning to his Boston-based commercial bank to find more corporate clients.


The commercial bank — the division that serves midsized and large business customers — has long been an important profit center for Citizens Financial Group. Its current national ambitions emerged around the time of the bank’s initial public offering in 2014, as the bank began its separation from former parent RBS, and accelerated after top commercial exec Don McCree joined in 2015.

The 1,650-person commercial bank has grown by 100 employees in the past four years, including 70 additional people outside of the branch footprint. (Overall employment, meanwhile, has remained relatively flat at Citizens, which employs about 17,500 today.)

The goal under McCree, a former top JPMorgan Chase executive, is to parlay his bankers’ expertise in sectors such as health care and real estate into a national franchise. When McCree opens an office outside of the footprint, he usually tries to hire locally, picking people who already have connections on the ground. In the case of the new office that opened on Nov. 1 in El Segundo, Calif., McCree sent out Kevin Boyle from Boston to help get it started. Other expansions, McCree says, are underway this fall in Dallas and Orlando. The most successful out-of-market incursion so far, he says, has been in Atlanta.


McCree’s national ambitions appear to be paying off: The company’s overall revenue in the most recent quarter rose 8 percent, to $1.6 billion, and net income rose 27 percent from the same time a year ago.

But investor interest has cooled. Citizens shares tumbled in February after the bank was tied to a loan described in an indictment of President Trump’s former campaign chairman, Paul Manafort. They later continued to slide as some investors bet Citizens and other banks of its size that struggled in the last recession would suffer again when the next downturn arrives, says Keefe, Bruyette & Woods analyst Brian Klock. He believes the shares are undervalued: Citizens remains one of the top-performing banks, based on earnings growth, among its large regional peers. (The stock is trading in the $36 range — down from nearly $47 in January — but Klock argues it’s worth $49.)

Klock applauds Citizens’ efforts to find business customers outside of its home base. Rivals such as JPMorgan and M&T Bank are looking to encroach on Citizens in Massachusetts, where it is the second-largest player after Bank of America. Klock argues that it’s better for a bank of Citizens’ size to go out and try to win over customers in other parts of the country than to just worry about protecting the home turf.

The best defense, McCree would probably agree, is a good offense.

Jon Chesto can be reached at jon.chesto@globe.com. Follow him on Twitter @jonchesto.