Sam Sidhu, the incoming president and CEO of Customers Bancorp, says the recent enactment of federal
"It really just reinforces what we at Customers Bank have believed for a long time, which is that digital assets are here to stay," Sidhu said during a conference call with analysts.
The $22.6 billion-asset Customers has been ahead of the curve on stablecoins, and Sidhu is not concerned that the GENIUS Act will increase competition from fintechs and other lenders — largely because of his expectation that the market's size will increase, as well as what he argues is Customers' substantial lead over potential competitors.
"The pie is getting bigger, and the pie is getting bigger faster than any slice of pie could take out," he told American Banker. "And I think what's going to take a long time for folks to understand is, if you're a bank, how do you participate? If you're a nonbank, how do you become a bank? Because becoming a bank is a three- to five-year process and costs hundreds of millions of dollars."
In a pair of recent interviews, Sidhu spoke about not only the bank's crypto strategy, but also what will and will not change as a result of his ascension to the top job at West Reading, Pennsylvania-based Customers Bancorp.
Sidhu, who joined Customers' board in 2012 and has been CEO of its bank subsidiary since 2021, will become CEO of the holding company on Jan. 1, the company announced Friday. His father, Jay Sidhu, will be retiring and transitioning to the role of executive chairman.
"From a day-to-day perspective, we have started the transition," Sam Sidhu said. "Jay has started operating more as an executive chairman."
According to Sam Sidhu, his appointment as chief operating officer of Customers Bank in 2020 came with an informal understanding he would transition into the leadership role within five to six years. "We're exactly on track at five-and-one-half years announcing the succession," he said.
Sam Sidhu
"I will be reporting to the board as of January, as opposed to reporting to Jay," Sam Sidhu said. He also noted that credit and risk management functions, as well as the chief financial officer of Customers Bancorp, will start reporting to him.
At the same time, the father-son character of the changeover will help smooth the transition, Sam Sidhu said. "There's no one at the organization that knows me better than Jay. There's an element of ultimate trust, which is very helpful. We can have a lot of very frank conversations."
"Our relationship is much more real and trusting," he added.
Holding steady
Sam Sidhu said he isn't planning any major directional changes. Sidhu said he's pleased with the company's performance, including its strategy of driving both loan and deposit growth by hiring teams of bankers.
"That over the last year or two has been a very important transition, starting with some teams we hired in 2023, 90 folks last year. I expect it will be a few dozen this year when it's all said and done."
Hiring bankers is much less labor-intensive than the serial-acquisition strategy that Sam Sidhu's father, a 73-year-old industry lifer, used to build Sovereign Bancorp between 1989 and 2006. Sam Sidhu recalled how paper-intensive that strategy was — with bankers spending months inside conference rooms, poring over boxes of documents, in order to reconcile numbers and get deals closed.
By contrast, growth fueled by hiring bankers is simpler, Sam Sidhu argued.
"If you can create a strong culture where you support your team members, you can actually bring in the best of the very large banks, the high-performance banks," he said. "The execution of that is much easier than buying a bank."
Customers' hiring spree is helping to boost its deposit base. In the company's second-quarter earnings report on Friday, it reported a 7% year-over-year increase in deposits to $19 billion. Noninterest deposits grew at a 22% annual clip, totaling $5.5 billion on June 30.
Overall, Customers reported net income totaling $55.8 million, up 3% from a year ago. Loans of $14 billion were up 17% from June 30, 2024.
"Our commercial banking teams, while primarily deposit-focused, have been also producing high-quality granular loan volume with strong relationship economics," Sam Sidhu said during the call with analysts on Friday.
During the quarter, Customers' asset yields widened by 18 basis points, far outpacing a one-basis-point increase in the cost of deposits, according to Hovde analyst David Bishop.
As a result, Bishop wrote in a note to clients, Customers' net interest margin grew by a better-than-expected 14 basis points to 3.27%.
Leaning into digital assets
The GENIUS Act, signed into law two weeks ago, aims to regulate stablecoins, a type of cryptocurrency whose value is tied to another asset, like the U.S. dollar, to maintain a stable price.
In recent weeks, large banks have been talking about the opportunities they see in the stablecoin market. But Customers already supports stablecoins through its cubiX payments platform, and the new law will only accelerate activity, Sam Sidhu told American Banker.
CubiX, which powers the real-time payment capabilities of commercial clients, including digital assets, saw an annual payment volume of $1.5 trillion last year, barely trailing Visa and ahead of Mastercard in commercial payments volume, according to Customers' most recent earnings presentation.
July was the most active month on cubiX to date, with deposit balances up about 20%, Sam Sidhu said during the call with analysts.
Larger banks will inevitably get more involved with stablecoins in order to meet all of their customers' needs. But Sam Sidhu argued that the business won't be all good for them.
"Large banks make money when there's friction and inefficient flow in the banking system," he said. "And a stablecoin — if it truly proves to be more efficient, cheaper, faster — you're really cannibalizing your existing revenue."
Being early to the stablecoin market has also had some downside for Customers. Last year, the Federal Reserve Bank of Philadelphia
Customers has
Customers does not charge fees to use its cubiX service, which decreases profitability in the short term. But Sam Sidhu said the bank hopes that increased activity on the platform will result in clients maintaining higher deposit balances at the bank.
CubiX is software that sits on top of the bank's existing core and payments infrastructure. It has become a staple in the stablecoin space, as every major exchange, stablecoin provider, market maker and investor needs to be a customer of the bank, Sam Sidhu said.
"All major institutional issuers that launch a stablecoin are likely going to need to be a customer of Customers Bank," he said.
"New entrants come in, they can't list without being on an exchange," he added. "You don't exist if you're not a member of our bank because you can't list on Coinbase, Kraken and Robin Hood without being with us."
John Reosti contributed to this story.
