Citizens Financial Group is looking west in search of new corporate clients and commercial loan growth.
The $162.7 billion-asset Citizens recently set up a new regional operation in Los Angeles, plucking David Musicant away from Fifth Third Bancorp to oversee Citizens’ commercial banking efforts in five Western states. The Providence, R.I., bank says the move is partly about following large clients to newer markets and partly about seeking more growth outside of its base in the Northeast.
“California and the Southeast and the Southwest are growing faster from a GDP standpoint. Some of our growth is following our clients as they move their corporate headquarters to other parts of the country, and some of it is joining banking relationships as companies expand,” said Don McCree, head of commercial banking.
In some ways, out-of-market expansion is just the reality of being a regional bank today. In spite of a strong economy, low interest rates and tax cuts, loan demand has been persistently sluggish. Plus, Citizens already has significant market share in its Northeastern base, so by definition, it can really only grow at the margins there.
Citizens is hardly alone in reaching for more commercial business outside its core markets. Fifth Third in Cincinnati said early this year that it planned to
“Over time probably all of these large regionals will be in all of the major cities at some point across the country,” said Brian Klock, managing director at Keefe, Bruyette & Woods.
The longest expansion on record has not translated into robust loan demand, so banks have had to find new avenues for balance sheet growth — and investors are becoming a little bit more understanding about that, said Scott Siefers, an analyst with Sandler O’Neill.
“Historically, going out of market isn’t something investors have been as enthused about, but I think investors are becoming more tolerant,” he said.
McCree said that Citizens is following the same basic blueprint it did when it
“We hire locally, people that have been in the markets for a long time, who know the marketplace, know the clients, know the economies, and know the subeconomies,” he said. “We want people knowledgeable about local nuances.”
Before joining Citizens, Musicant worked as a managing director at Fifth Third, where he oversaw its own California expansion. Before Fifth Third, he worked at MUFG Union Bank in San Francisco for 20 years.
At Citizens, he will oversee commercial banking across Arizona, California, Nevada, Oregon and Washington. Citizens has roughly 40 employees working on commercial-and-industrial lending in those states, including bankers and various support staff. It already had over 100 corporate clients in California when it added Musicant to its roster and plans to bank firms in industries it already knows, including technology and entertainment.
The new effort is separate from a commercial real estate lending business it had already established in California, McCree said.
Citizens has also added to its other commercial banking capabilities in recent years, for example by acquiring M&A advisory shops
“I don’t think any bank, other than maybe community banks, think of themselves as pure regional operators,” he said. He said investors would be right to be concerned if, say, “a bank was expanding into a market and taking more risk or creating a higher risk profile because they were stretching for loan growth, and that’s not our style.”
