Finding that right balance where you’re challenging, if you’re a board member, but you’re respectful and you’re trying to make sure that the company is making the right decisions, and if they want to go left, what are the reasons we’re going to go left? And what do you think about right? And, yep, that makes sense. Did you ever think about this? That type of back and forth and give and take with the board and management is very helpful, particularly when we were going through a turnaround and we had a lot of just important decisions to make, and we had to make them fast.
I think what is interesting is just as Citizens has moved through the turnaround phase, we’re in a new phase called, “Aiming for excellence,” where we’re making that sprint to be a top performing bank we need to start thinking more long-term. And we can spend more time on strategy, which the board welcomes, but in the olden days, there was a lot of regulatory pressure on bank boards, so a lot of time was chewed up by regulatory. And then it was really focusing on the turnaround and the execution and getting the numbers better.
Now that the numbers are better, we can start take thinking, where’s banking going? What is changing in the way customer expectations are being affected and impacted by big tech and other industries and how to banks compete with that? So, I think it’s been great. I think the board is having a really good time having seen the progress that we’ve made, and now we’re looking forward to spending more time on the longer-term strategy.
I think it’s been helpful just to see how other companies deal with issues and be part of that board dynamic. Certainly, by the time you become a chairman of a board, you’ve been on enough boards that you actually can help orchestrate the right dynamic on the board. So, I would strongly encourage other CEOs that if they have the opportunity to go on an outside board, it’s a great learning experience, and it helps build your network.
Are you worried about a potential recession? What’s your plan if one were to arise?
Our best guess is that there’s no signs that a recession is imminent. And typically, you would see some excesses popping up in the economy. You’d see some trouble in credit on the consumer side or on the commercial side. And we don’t see any of that.
The consumer is in good shape, in particular, unemployment is at historic lows. There’s real wage growth, salary increases is 3.2% and inflation is only at 1.5%. The consumer feels good. They’re out spending money. Now, with rates coming down, they’re going out and locking in lower-class debt, so mortgage finance boom is upon us. That’ll give people more disposable income to spend. I think we’re in really good shape on the consumer side.
And commercial, the business person is pulling back and a little more cautious, given some of the trade skirmishes. [They are wondering], “Should I really buy that extra piece of capital equipment, or should I hold off and see how the dust settles?” So that’s, I’d say, having a little dampening effect on loan demand.
But I think that’ll quickly be offset by rates coming down, right? We’ve had one rate cut, we might have another, if you look at the forward markets to this year. And I’ll tell you lower cost of financing stimulates more borrowing, either people want to lock in and refinance, just like the individuals do with their mortgage, the companies want to refinance their debt. Or price-sensitive investors who have capital to put to work, like sponsor firms or commercial real estate investors, they’re going to take advantage of those lower borrowing rates.
I think on both sides, we’re in good shape. You know, you could talk yourself, you could worry yourself into a recession, but I don’t think that’s going to happen. It’ll be interesting to see how the whole China scenario plays out. There could actually be quite a bit of upside if it works out well, but if we just operate in a protracted stalemate, I don’t think there’s huge downside.