Over the last two years, Citizens Financial Group has made opportunistic pivots to expand its footprint and add strategic priorities. Now the regional bank is hoping that private equity-backed mergers and acquisitions will soon help it to maximize the value of the new relationships it's gained.
The volume of M&A transactions has slowed amid high interest rates and inflation, but the possibility that the Federal Reserve will lower rates, which many observers expect will happen next year, could bring
Citizens plans to use renewed investor demand for deals as a bridge to cross-sell products in its private banking and wealth management businesses, Van Saun said in an interview.
The Providence, Rhode Island-based bank is positioned to be a leading provider of credit lines and advisory services to private equity firms seeking to acquire mid-size businesses, Van Saun said.
"After a lull in the action," he said, "it's a natural strategy that has a high-growth opportunity."
Serving a resurgence in private equity-backed M&A will
Not only will the Providence, Rhode Island-based bank receive advisory fees from its portfolio of small-business clients, it will also get buy-side financing fees from acquiring investors, he said.
"We have a broad network of middle-market companies, and a number of them will put themselves up for sale every year," Van Saun explained.
When private-equity investors purchase a business, the company's owners and executives "take some chips off the table and realize some of the value they've built up over time," he said.
When those existing commercial clients complete a sale, Citizens wants to expand its relationships with them so that they also use the bank's private banking and wealth management services.
"Of course, we'll make some loans … but we're really focusing on the deposits and then bringing over the personal wealth of the owners and principals in those firms," he said.
Leveraging existing relationships across business groups is more cost-effective for banks than organically growing their customer bases, John Popeo, a principal at The Gallatin Group, a financial services consulting firm, said in an email.
"Cross-selling products and services generally makes for a stickier customer relationship," Popeo said.
While middle-market M&A activity is expected to increase next year, economic uncertainty is complicating the deal horizon, Popeo added. "Exits remain challenging in the current environment," he wrote.
For his part, Van Saun pointed to opportunities that grew out of a series of acquisitions Citizens made in recent years and said the bank will be ready for growth when the economy improves.
In 2019, Citizens acquired Clarfeld Financial Advisors, an asset and wealth management firm based in New York. The bank also purchased
At the same time, Citizens grew its presence in the New York City metro market by
Over the last year, Citizens has also
"In New York, we're going full-bore with the ground game," Van Saun said. "In California, we're coming in over the top at the highest end of the market."
While Citizens' wealth management business is currently organized within the its consumer portfolio, the recent launch of its private banking group set the foundation to one day possibly merge wealth management and private banking, according to Van Saun.
In the meantime, Citizens hopes to continue building out both businesses as the economy improves, he said.
"We built this strategy, and it's been idling a little bit through the last year and a half," Van Saun said. "But there are a lot of big pipelines and money on the sidelines ready to do deals, so we could start to see that lift off again."
