Citizens Financial Group Inc. is looking to play offense in the nation's largest city, where it will face off against some of the nation's largest banks.
Within the last three months, the Providence, R.I.-based regional bank announced a pair of deals that will put the company into the top 10 for deposit share in the New York City metro area. Prior to the deals for HSBC Holdings PLC's East Coast branches and Investors Bancorp Inc., the bank was not in New York City's top 100 banks by deposit share with less than $1 billion in deposits.
After the deals, Citizens will be the No. 7 bank in New York City with more than $30 billion in deposits, according to S&P Global Market Intelligence data. The analysis capped deposits at $1 billion per branch to limit the impact of deposits consolidated from other markets.
Citizens' purchase of Investors will allow the regional bank to not only compete in the Big Apple but also fill in a hole in the company's branch footprint, said Brendan Coughlin, head of consumer banking for Citizens.
"We're very, very strong in the Northeast, and we're very, very strong in the mid-Atlantic," Coughlin said in an interview. "And we were just missing distribution and a way to compete in that tri-state area in New Jersey and New York."
Competing in the greater New York metro area could be a difficult task, analysts said. The nation's largest bank, JPMorgan Chase & Co., has a dominant lead in deposit share, holding nearly 21% of all deposits when no other bank is in the double-digits, according to an S&P Global Market Intelligence analysis.
Other heavyweights constitute the top five in New York City, including Citigroup Inc., Bank of America Corp. and Wells Fargo & Co.
"This is an extraordinarily competitive market they're going into," Gerard Cassidy, an analyst for RBC Capital Markets, said in an interview. "They won't be picking off low-hanging fruit."
At the same time, Cassidy said competition in the banking industry has been intense for years, so it is unlikely Citizens would be surprised by the level of competition in New York City. And Citizens' smaller size relative to JPMorgan could prove to be an advantage since it could allow the new entrant more flexibility in navigating the large marketplace. Cassidy pointed to Citizens' national business lines through its digital channel as a potential tool in gaining share in New York City.
"They know what they're up against," Cassidy said. "It's not as if they don't compete against Bank of America and JPMorgan in other marketplaces."
While New York City has a lower-growth outlook and the COVID-19 pandemic has cast a shadow over economic activity in urban centers, analysts said there is still plenty of opportunity in the nation's largest city. And, in Citizens' case, the bank already has a significant presence in many of the top destinations for households weary of the city life.
"In many cases, you may move from the Upper West Side to Westchester County or to Connecticut. You're still going to see a Citizens branch," Terry McEvoy, an analyst for Stephens Inc., said in an interview.
And since Citizens' pair of deals largely fill in a hole in the bank's branch footprint, the company should be able to realize efficiencies while incorporating the deals. Cassidy said economies of scale are crucial when competing for retail consumers. He said deals, especially in a large, contiguous market, should deliver cost savings that benefit the bottom line.
"It's such a large market in New York City that you can have a small move in the percentages and it could result in a fairly sizable increase in deposits or balance sheet assets," Cassidy said.