Under new Chief Executive Bruce Van Saun, RBS Citizens Financial is planning to hire hundreds of mortgage and business lenders as it looks to boost its loan portfolio and improve its revenues ahead of its widely anticipated public stock offering.
Van Saun officially took the helm at Royal Bank of Scotland's U.S. subsidiary on Tuesday, starting the clock on his mandate to complete a partial offering of Citizens by early 2015 — or even late next year.
"I'm trying to pull it forward. [The first quarter of 2015] would be the fallback," Van Saun said in an interview Wednesday.
But if he wants investors to buy into his plans — and to help RBS shed some of its U.S. holdings — Van Saun has to prove that Citizens can improve its returns on equity and assets. In the quarter that ended June 30, the $136 billion-asset company reported an ROE of 3.04% and an ROA of 0.52%, according to the Federal Deposit Insurance Corp. Now he is hiring "hundreds" of people in mortgage originations, small-business lending and wealth-management services in an effort to boost quarterly profits. (He would not be more specific about how many people he has hired.)
Van Saun is also expanding Citizens' corporate lending operations, in an attempt to get more business from companies outside of the Providence, R.I., bank's 12-state footprint. Citizens also has national ambitions in auto lending and student lending, where Van Saun says he still sees a role for private lenders in the government-dominated market: "Government programs have certain characteristics that might not appeal to all borrowers," he says.
He also plans to retain more of the mortgages that Citizens originates, in an effort to diversify the bank's consumer assets beyond home equity and auto loans.
"We really have a revenue challenge. Part of that is the yield on our assets — our loan-to-deposit ratio is quite low, in the low 80s," Van Saun says. "We need to rejuvenate our ability to originate and put earning assets on the books."
Van Saun, the former group finance director for all of RBS, has spent the past four years making similar assessments across the parent company as it tries to shed its extraneous businesses. The company, which is 81% owned by the U.K. government, in May said Van Saun would take over for retiring Citizens CEO Ellen Alemany and ready the unit for a partial offering.
While RBS has not completely ruled out an eventual sale of Citizens, likely buyers are limited and Van Saun has repeatedly said that current market conditions make such a deal unattractive. On Wednesday, he was optimistic about conditions improving enough for him to complete the partial offering by late 2014.
"Broadly we're getting closer to an inflection point where rates are going to move up … which is broadly positive for most banks' earnings and returns," he says.
Some of his plans are less about expansion, however; several news outlets reported Friday that RBS is looking to sell 105 branches in Chicago. Van Saun, asked about his plans for the branches earlier in the week, called the current Citizens branch network "fairly attractive, so one thing I really like about Citizens is our footprint. … Every bank from time to time looks at different opportunities to fine-tune that footprint, but I think that's what we'd really be talking about, fine-tuning."
Van Saun also has to contend with turnover above him, although he claims his mandate from London is unchanged. RBS Group CEO Stephen Hester, who hired Van Saun in 2009 and gave him his American assignment in May, announced his plans to resign over the summer. On Tuesday, the same day that Van Saun officially took over Citizens, RBS retail head Ross McEwan also officially replaced Hester.
"It's been a fairly intense period. I feel good about what we've left behind on RBS," Van Saun says.
The executive-level turnover has had little impact on his marching orders, he adds.
"I worked very closely with the board and there's continuity with the board … and I've worked closely with Ross," he says. "We need to focus on performance improvement, and I think we have good alignment."