Citizens Bank boss cheers Trump tax, reg moves, urges care on trade, immigration

The U.S. economy grew less than 2% last year. Bank loans grew faster -- nearly 7%, with business loans helping lead the way. At Citizens Bank, lending was up 8%, for the second straight year.

CEO Bruce Van Saun expects to do that well again in 2017, with help from some President Trump proposals, and despite others.

Van Saun was in town today to check in with local market chief Dan Fitzpatrick, who also runs corporate lending (companies with $500 million to $2.5 billion in yearly sales) across Citizens, the 23rd largest U.S. commercial bank, and one of the largest in the Philadelphia area, where its main rivals are Wells Fargo, TD, PNC. He was also checking in with his daughter, a Center City graphic designer.

After 5,000 protesters followed President Trump through his Thursday visit, Van Saun said "elements of (Trump's) platform" appeal to bankers -- though not Trump's broad criticism of immigration and trade.

"What we would like to see from the new administration is the commitment to faster economic growth," Van Saun told me at Citizens' local headquarters, upstairs at One Logan. 

"We need tax reform. That's the top of the list. The country has become less competitive. The U.K. has cut its (top corporate income tax rate) from 28% to below 20%." Similar cuts "would make the U.S. a more attractive destination for investing and for capital."
 
Also, "rolling back on some of the excess regulation that has built up across all industries over the last decade. It's well-intentioned, and a lot of it is really good. But the cumulative effect can be very burdensome on businesses. There's a renewed hope there will be a re-examination of what's the good stuff we need to keep and what to roll back on.  

"Part of the reason we're seeing there's renewed optimism is that there's an administation now that understands business is the engine that creates jobs."

Van Saun also looks forward to "pro-energy policies, finding a fix for the Affordable Care Act, and getting on to lower individual tax rates. We'd favor that."

Like a lot of other big businesspeople, Van Saun is not excited about the whole Trump agenda: "I'm a little more guarded on what's happening with trade and immigration. I think we have to recalibrate those and get them in a better place. There's a danger we'll go too far and that will be bad for the economy. 

"We'd like to see the Trump administration work with the Republicans in Congress. We expect a half-percent bump in GDP this year, to 2.3%, up toward 3% in 2018." (Citizens rival Wells Fargo is also projecting 2.3% U.S. growth this year.) 

He's a little concerned about the implications of spending a lot more on infrastructure just now. "A lot of the stimulus is going to be happening late in the economic cycle," Van Saun noted."The unemployment rate is relatively low. Can we pull people from the sidelines into the labor force? That's a big question.

"If we get stimulus, but not the increase in labor supply, we could get inflation," he added.

"The Fed is very vigilant in monitoring that. The way to get faster GDP growth if you exhaust labor is, you need more productivity.

"And that's been the missing part of the equation. We've had all these big advances in technology. But where's the productivity?" Companies don't seem to be boosting their output per worker, Van Saun noted. 

"Part of that is, business capital spending has been soft for a long time. Hopefully some of this reform has made business more optimistic."

What is there to ensure a Trump tax cut will be used to create jobs -- and not just to buy back company stock in an attempt to inflate share prices? I asked.

Van Saun says he'd like to see federal tax cut target incentives, "so when the money comes back it supports roads, tunnels, bridges; and plant and equipment and other capital expenditures. And how about job retraining programs? We could use the community colleges to retrain people." Incentives for investment "would be good."

Not all investments create jobs. Service companies in particular "are just scratching the surface of how to employ artificial intelligence and process automation (robotics)," Van Saun noted.

Citizens has automated cash-management sign-ups and cut the time it takes to set up a new account from 45 minutes, with a 3% error rate, to "four minutes with zero errors," Van Saun says. Citizens' fast-growing student-loan refinancing program is considering a similar investment. 

"That will free up labor (Citizens employs 19,000) so we can have more people facing the customer and providing advice" on wealth-management, loans and other profitable products, Van Saun concluded.

The Trump administraiton "could influence (investment) in a material way by offering an instant capital-expenditure write-off in the tax code."

 

I asked Fitzpatrick how the midsized business group he heads, which targets clients with $500 million to $2.5 billion in yearly sales, is managing in competition with PNC, Wells Fargo and other big banks in the market.

Backed by Citizens' (formerly Royal Bank of Scotland's) team of energy bankers in Houston, Fitzpatrick has landed Pennsylvania clients including Marcellus and Utica Shale gas developer Rice Energy, one of the few companies that was financially ready for the early 2010s drop in energy prices, he told me. 

Citizens has also expanded its relationship with the Holt family port operations businesses in Philadelphia and other Delaware River ports, and hopes to play a significant role in financing the industrial redevelopment of the riverfront as Sunoco Logistics expands its Marcus Hook processing center and Mariner pipelines across Pennsylvania.

Energy interests hope that will attract more energy and raw-materials users to the former oil, chemical and steel facilities in the tri-state area.

To prepare for the possibility of more industrial jobs, Fitzpatrick says Citizens is working closely with the vocationally-focused new William Penn high school in Philadelphia and the Philadelphia Works organization. "That's what our community clients need -- good jobs," he concluded.