Citizens Financial Group announced in February that it had hired two ex-JPMorgan Chase executives, Michael Cherny and Tom Metzger, to lead its fledgling private bank.
During the first quarter, deposits gathered at Citizens' private bank doubled from the prior quarter to $2.4 billion, the company said Wednesday. Meanwhile, loans made to private banking clients grew from $300 million in the fourth quarter to $1.1 billion as of March 31, Citizens said.
Two of six planned private banking offices have opened, one each in Boston and Palm Beach, Florida, and the opening of a third in California is imminent. On the staffing side, the $220.4 billion-asset company, which has already hired more than 200 bankers for its private bank, says that it's talking to multiple private wealth-management teams at other companies about joining Citizens.
In an interview Wednesday, CEO Bruce Van Saun said Citizens is now focused on adding scale.
"The good news from our standpoint is people see what we're trying to build and the quality of the private bankers we've put in place, and that becomes very attractive for folks who want to join that effort," Van Saun said.
Whether any of the teams in discussion with Citizens hail from the failed Signature Bank or New York Community Bancorp, which acquired parts of Signature last year, remains to be seen. Several private banking and commercial banking teams from New York Community are joining other banks following months of turmoil and leadership turnover at the Hicksville, New York-based company.
"We have broad interest from multiple teams operating on multiple platforms," Van Saun said.
Citizens offers mostly-free financial advice and planning to every wealth management customer who walks through the door, a strategy that was designed to set the bank apart from its competitors.
Last year's failures of Silicon Valley Bank, Signature Bank and First Republic Bank, all of which offered private banking services, opened the door for Citizens to ramp up its own offerings. Most of the 200 private bankers that Citizens has hired came from First Republic, a Citizens executive said in February.
Citizens is trying to grow its private bank fairly quickly. By the end of 2025 — about two years after the launch — the company is targeting $11 billion of deposits and $9 billion of loans. It aims to increase assets under management, which totaled about $500 million through the end of March, to $10 billion by the end of next year.
Last July, Citizens named Susan deTray, a former First Republic executive, as head of its private bank. In February, the bank announced that two ex-JPMorgan Chase executives, Michael Cherny and Tom Metzger, had been hired for key roles in the private bank as it was seeking to attract more clients. And on Monday, Citizens said that Paul Casey, a former Morgan Stanley executive, will join the company in July as head of wealth management.
Two more offices in California — one in San Francisco and another in Silicon Valley — will "hopefully" open this year, and a flagship office is being planned for New York City, Van Saun said in the interview.
So far, Citizens has poured at least $115 million into building its private bank. That total includes $38 million during the first quarter, the bank disclosed Wednesday in its quarterly earnings report. It announced back in January that it expects to spend an estimated $208 million on private-bank-related costs for the full year, a figure that Van Saun confirmed on Wednesday.
Costs associated with the private bank reduced quarterly earnings per share by three cents in the first quarter, the company said. That was an improvement from a six-cent reduction in the prior quarter.
"Our expectation is that in the second half of this year, the lines cross, and this moves to being profitable from being a drag on our returns," Van Saun said. "And if we continue to track toward our 2025 goals, this would be significantly profitable and 5% accretive to bottom-line EPS."
During the first quarter, Citizens' expenses excluding certain notable items — integration-related costs, a Federal Deposit Insurance Corp. special assessment and revenue and efficiency initiatives — were $1.4 billion, up 3% year over year. The uptick was partly due to an increase in salaries and benefits related to the private bank and partly due to technology and equipment costs, the company said.
NYCB's latest challenge: Losing bankers to competitors
Net income for the quarter was $334 million, down 35% from the year-ago period. The decline stemmed in part from a 12% year-over-year reduction in net interest income.
Excluding the notable items, earnings per share were 79 cents, which topped the average estimate of 71 cents from analysts surveyed by FactSet Research Systems.
Average deposits were $176.1 billion, up 1% from the same quarter last year. The company reported growth in retail deposits, while commercial deposits declined 6% on average as a result of what Citizens described as deposit optimization initiatives.
Average loans declined 7% year over year to $145.9 billion. The decrease was the result of several factors, including the wind-down of Citizens' indirect auto loan portfolio and lower client loan demand, the company said.
David Rochester, an analyst at Compass Point Research & Trading, cited the downturn in loans as a "less favorable aspect" of the quarter. If loans continue to decline, it could be hard for Citizens to meet its financial guidance for the rest of the year, he wrote in a research note.
"As [Citizens] needs more loan growth than many banks to achieve both its loan growth guidance as well as [net interest income] outlook for 2024, we are concerned that if soft trends on this front persist, these guides will become much more difficult to achieve," Rochester wrote.
For his part, Van Saun said he isn't too worried about future loan growth.
"What we expect to see over the course of year is that we'll start to see a pickup in loan demand across commercial, and as the private bank grows, we'll see it there as well," he said.
Update
This story has been updated to note that Citizens named Susan deTray head of its private bank and Paul Casey head of wealth management, and to clarify that Michael Cherny and Tom Metzger were hired for key roles within the private bank.
Experts say the playing field has fundamentally changed as fractional ownership and other paths to access make alternative investments increasingly available.
More than five dozen stories from the past year reflect an era of building controversy and pushback amid ongoing efforts to remove barriers and promote careers.
Fifth Third Wealth Advisors President Eric Housman thinks his bank's $2 billion advisory practice still occupies a distinct position in the industry. But it's not likely to stay that way.
From trending independence to the rise in AI in wealth management, these stories and series dove deep on issues of utmost importance to financial advisors in 2024.
Trump returns to the White House promising both deregulation and tariffs, the Fed considers whether to keep dropping interest rates or not and markets, which hit new highs in 2024, are watching it all closely in the new year.
Michael Bernier oversaw roughly $165 million in client assets at Canter Strategic Wealth Management, a firm with $300 million under management. Then he left to join LPL.
