ORLANDO Bruce Van Saun plans to start separating RBS Citizens from the Royal Bank of Scotland later this year. But as in all divorces, first he must face the devil in the details.
RBS sent Van Saun to take over Citizens Financial Group in October, putting him in charge of separating the U.S. unit from its money-bleeding, bailed-out British parent company. The bank now plans a series of public offerings that will make Citizens completely independent of RBS by 2016.
But before he can sell his bank to shareholders, Van Saun has to resolve all of the mundane, logistical problems that accompany most breakups. Perhaps most importantly, Citizens needs to develop the internal infrastructure to stand on its own as a bank, rather than a unit of a foreign parent company.
"How do we separate from RBS and then up our game, so that we can perform like a public company?" he said in an interview.
(The Providence, R.I., bank is also regularly mentioned as a possible acquisition target, though market conditions for bank deals remain pretty wretched, and Van Saun has consistently downplayed any speculation about an outright sale.)
The bank particularly needs to improve its internal financial reporting capabilities, according to Van Saun. It has issued some public debt on its own, but as a unit of a larger foreign company, RBS Citizens has not had to report its results or deal regularly with shareholders. Now Van Saun has hired a new head of investor relations: Ellen Taylor, a veteran of Wachovia and BlackRock's IR departments.
"The bar's higher when you're actually a public company and you have equity shareholders and you have to do quarterly conference calls and all that," Van Saun says.
He also faces some potential custody battles, or what he calls "just pure separation" issues: "There are things that we do for RBS, and things that RBS will do for us, which we have to figure out how to separate."
For example, Citizens currently runs a U.S. data center also used by the Royal Bank of Scotland's investment banking operations in this country, "and so they'll need to be able to have their own capability" or at least hammer out an agreement to continue using the Citizens unit, Van Saun says.
The commercial bank and the British investment banking unit also currently share a central entity for their human resources, training and payroll needs, "so we've devolved those and figured out how to cut them," he adds.
Citizens won't cut all ties with RBS; Van Saun says the bank will "maintain a business relationship" with its current parent, in part to offer U.S. customers access to cash-management, foreign exchange and other treasury services offered by international companies.
Of course, in order for the public offerings to be a success, Van Saun also has to sell investors on the overall performance of RBS Citizens which he acknowledges is still lagging.
"Our financial performance still needs to improve," but "Rome isn't built in a day," he says, adding that the bank hopes that "progress will be evident by the later part of the year. It still won't be where we fully want it to be, but I think that we'll be able to demonstrate that there [are] programs in place and they will bring us towards an upward trajectory and towards a good destination in 2015 and 2016."
He also acknowledges that "like all banks, we have work to do on the regulatory front. So one of the things we're conscious of is, we're not cutting any corners to put profitability as number one."
Last year, Citizens paid $14 million to settle U.S. regulatory charges over its overdraft programs and other checking account practices. That came a year after it paid $137.5 million to end a class action over its overdraft fees.
Technology and internal systems are another area where RBS Citizens has been spending money to retrofit recently. Under Van Saun and his predecessor, Ellen Alemany, the bank has spent $900 million since 2009 on "major projects, most of which is technology," and the bank will devote another $500 million to that through next year.
"A little of what we're doing is still playing catch-up on some of the core systems," Van Saun says. "Maybe five to ten years ago, we were spending too little.... and you've got to make some offensive investments in addition to playing catch-up."
He spoke after giving a presentation to Retail Banking 2014, an American Banker conference.