Citizens Bank is undertaking a significant strategic shift in its physical retail strategy, announcing plans to close between 100 and 120 supermarket-based locations while simultaneously launching 50 to 60 new, smaller, stand-alone branches. This transformation, detailed in the bank’s second-quarter earnings presentation, signals a deliberate move away from transactional banking within retail environments and towards specialized, advice-driven financial centers. The new branches will be strategically located near their former supermarket counterparts and will place a greater emphasis on private banking, wealth management, and serving small businesses.
This initiative represents a calculated reinvestment in the bank’s existing markets, a departure from aggressive geographic expansion seen by some of its regional peers. Citizens CEO Bruce Van Saun articulated the rationale behind this approach, stating, "This type of careful investment in physical locations and in people, if executed well, should create a nice lift in the deposit trajectory without taking on the risk and significant capital expenditure of opening a whole bunch of de novos outside of the footprint." This statement, made during a conference call on Thursday, underscores a long-term strategy that has been gaining momentum within the bank’s leadership in recent months.
A Calculated Pivot: Focusing on Core Markets and High-Value Services
The strategy aligns with previous pronouncements from other senior Citizens executives. In May, Matt Boss, head of Citizens’ consumer bank, emphasized the ample opportunities within the bank’s current 14-state operating footprint. This internal focus contrasts with the expansionary tactics of other regional banks, such as Huntington and Fifth Third, which have pursued growth by acquiring lenders outside their traditional geographic areas, notably in Texas. Citizens’ approach prioritizes deepening its presence and service offerings within its established network.
The transformation of Citizens’ physical presence is not merely a matter of closing and opening new doors; it involves a fundamental redesign of the branch experience. The new or renovated branches will be significantly smaller, reducing from approximately 7,000 square feet to a more efficient 2,000 to 3,000 square feet. This reduction in transactional space is a direct consequence of the shift in focus. The emphasis will now be on creating environments conducive to in-depth conversations between bankers and clients, fostering stronger relationships and facilitating more complex financial discussions.
Brendan Coughlin, President of Citizens, previously highlighted this strategic recalibration, particularly in legacy markets like New England. In March, he told Banking Dive, "particularly in New England, we’re going to do a lot of surgery around some of our legacy markets." This "surgery" involves re-orienting the bank’s service model to cater more effectively to the mass-affluent customer segment and above. The redesigned branches are intended to be more "impressive," situated on prime real estate, and staffed to deliver a superior advisory experience.
Industry Trends: A Broader Movement Towards Advisory and Digital Integration
Citizens’ pivot towards serving the mass-affluent demographic is not an isolated phenomenon in the banking industry. Competitors such as Truist and Regions have also articulated similar strategies, focusing on enhancing their advisory services and catering to higher-net-worth individuals. This trend reflects a broader industry recognition that while digital channels handle routine transactions, physical branches can serve as crucial touchpoints for personalized advice, complex financial planning, and relationship building.
Furthermore, the move away from supermarket branches is a well-established trend. Huntington’s acquisition of TCF in 2021 led to the closure of nearly 100 branches located inside Meijer grocery stores. Similarly, People’s United, prior to its acquisition by M&T, closed 140 branches situated within Stop & Shop supermarkets. U.S. Bank and PNC have also engaged in similar rationalizations of their grocery store-based branch networks. These actions underscore a recognition that the cost and operational complexity of maintaining these embedded branches often outweigh their benefits in an era of evolving customer preferences and digital banking capabilities.
Financial Projections and Performance Metrics
Citizens projects that this comprehensive branch retooling will not impede its ambitious financial targets. The bank anticipates achieving a return on tangible common equity (ROTCE) of 16% to 18% by the end of 2027. This forward-looking projection suggests confidence in the efficacy of the new strategy to drive profitability and shareholder value.
The bank’s recent financial performance further supports this optimism. In its second-quarter earnings statement, also released on Thursday, Citizens reported a ROTCE of 13.9%, an increase from 12.2% in the preceding quarter. This upward trajectory in a key profitability metric indicates that the bank’s strategic adjustments are beginning to yield positive results.
Beyond ROTCE, Citizens demonstrated robust overall financial health. The bank’s profit surged by 35% year-over-year in the second quarter, reaching $587 million. Revenue also saw significant growth, rising 12% year-over-year to $2.3 billion, according to the Thursday report. These figures suggest that while the branch network is being transformed, the bank’s core business operations remain strong and are contributing to substantial financial gains.
The Evolving Role of Physical Branches
The strategic repositioning of Citizens’ branch network reflects a fundamental rethinking of the purpose of physical banking locations in the 21st century. For decades, branches served as the primary point of contact for most banking needs, from simple deposits and withdrawals to loan applications and account inquiries. The rise of ATMs, followed by the proliferation of online and mobile banking, has steadily diminished the transactional role of branches.
Consequently, banks are increasingly viewing their physical footprints not as centers for routine transactions, but as hubs for high-value interactions. The smaller, more intimate design of Citizens’ new branches is indicative of this shift. The focus on dedicated meeting spaces and fewer teller stations suggests a move towards creating an environment where customers feel comfortable discussing their financial futures, seeking expert advice, and engaging with bankers on more complex matters.
This strategy is particularly relevant for the mass-affluent and high-net-worth segments, who often require personalized guidance on investments, retirement planning, estate management, and small business financing. By concentrating resources on these areas and staffing branches with specialized advisors, Citizens aims to capture a larger share of this lucrative market.
Implications for Customers and the Banking Landscape
The implications of Citizens’ strategic shift are multifaceted. For customers who previously utilized supermarket branches for convenience, the closure of these locations may necessitate adjustments to their banking habits. However, the bank’s commitment to opening new stand-alone branches nearby suggests an effort to minimize disruption. The emphasis on advisory services could prove beneficial for customers seeking more sophisticated financial solutions, potentially leading to stronger financial planning and wealth accumulation.
For small business owners, the increased focus on their segment could translate into more tailored lending products, advisory services, and dedicated relationship managers. This could be a significant advantage in a competitive business environment.
From a broader industry perspective, Citizens’ actions signal a continued evolution in the retail banking model. The success of this strategy could encourage other regional banks to reconsider their own branch footprints and service offerings. The trend towards advisory-focused branches and a refined approach to geographic expansion appears to be a dominant theme in the current banking landscape.
The emphasis on efficient use of capital, as highlighted by CEO Bruce Van Saun, is also a critical takeaway. By reinvesting in existing markets and optimizing branch size and function, banks can potentially achieve growth and profitability without the substantial risks and investments associated with de novo expansion into unfamiliar territories. This approach may prove particularly appealing in the current economic climate, where prudent financial management and strategic focus are paramount.
Citizens’ commitment to its financial targets, coupled with its strong recent performance, suggests that this strategic transformation is not merely a theoretical exercise but a well-executed plan designed to enhance customer relationships, expand its advisory capabilities, and ultimately, drive sustainable financial growth. The coming years will reveal the full impact of this bold reimagining of the retail banking experience.
