Bruce Van Saun, CEO of Citizens Financial Group, believes that in the near future, the scale of consolidation in the American banking sector will be limited due to the impact on the situation in the industry of such negative external factors as high interest rates and significant degree of pressure from regulators.
Bruce Van Saun says that with the current high-interest rates, it is extremely difficult for financial institutions to implement profitable acquisitions. Also, according to him, the American regulatory environment in its modern configuration is characterized by considerable uncertainty. This state of affairs also worsens the prospects for bank mergers.
The head of Citizens Financial Group suggests that small financial institutions may participate in some transactions, but this activity in the coming months, as he believes, will not be high and will continue to remain within the limited scope.
Bruce Van Saun argues that the current problems of the banking sector are twofold. Continuing to focus on the consequences of the financial regulator’s policy of raising interest rates and the uncertainty of the legal context, he noted that the problem exists not only at the level of industry-wide trends but also in the space of obvious processes in the operational dimension of the existence of creditors. The mathematics of transactions, as the head of Citizens Financial Group put it, does not work very well because of the current interest rates. He also noted that regulatory uncertainty makes it difficult for financial institutions to plan strategies. Bruce Van Saun said that official Washington still has not indicated its position on these issues.
The collapse of Silicon Valley Bank and First Republic Bank in the first half of 2023 were the events that led to increased regulatory control over the US regional banking sector. Against the background of new realities, many lenders are taking measures to strengthen their capital and increase liquidity. These financial institutions are reducing balance sheets, expectations of tighter regulatory oversight, and further interest rate increases. The cautious tactics of banks’ actions are designed to ensure a high level of compliance with regulatory observations and maintain stability.
Bruce Van Saun, despite not having the most favorable environment, is confident that Citizens Financial Group will be able to navigate the changing landscape. According to him, the control by regulators, which has a kind of development towards tightening, remains quite manageable and does not affect the activities of the financial institution headed by him. He is also confident that the strength and talent of the bank will meet the expectations of regulators.
Citizens Financial Group is currently recording the stabilization of deposit flows. Bruce Van Saun says that the worst period for the bank has already ended. He also noted that capital markets are starting to open, as a result of which the number of transactions will increase in the coming months, which will become a favorable factor influencing the incomes of financial institutions. At the same time, according to the forecast of the head of Citizens Financial Group, the growth of activity and improvement of indicators will be limited.
As we have reported earlier, Citizens Bank to Pay $9 Million Fine Over Credit Card Billing Errors.
