M&A Announcement

Jul 28, 2021

Good morning, and welcome to this call to discuss Citizens Financial Group's acquisition of Investors Bancorp, which was announced earlier this morning. Today's call is being recorded. My name is Brad. I'll be your operator today. Currently, all participants are in listen only mode. Following the presentation, we will conduct a question and answer session. Now, I'll turn the call over to Kristin Silberberg, Executive Vice President, Investor Relations. Kristin, you may now begin. Thank you, Brad. Good morning, everyone, and thank you for joining us. First, this morning, our Chairman and CEO, Bruce Van Son and CFO, John Woods, will offer some comments on the acquisition, referencing a presentation, which along with our joint press release issued earlier this morning, you can find on our Investor Relations website. A replay of this call will also be available on the website. After the presentation, we'll be happy to take questions. Brendan Coughlin, Head of Consumer Banking Don McCree, Head of Commercial Banking and Malcolm Griggs, our Chief Risk Officer, are also here to provide additional color. Our comments today will include forward looking statements, which are subject to risks and uncertainties that may cause our results to differ materially from expectations. These are outlined for your review on Page 2 of the presentation. I also refer you to Citizens' and Investors' filings with the SEC, including the risk factor disclosures in their respective Form 10ks and 10 Qs. Citizens and Investors will also be filing materials related to the proposed transaction with the SEC. We urge you to read those materials once they are available. These additional materials can be obtained free from the SEC's website and from each company's website. In addition, investors and its directors and Executive Officers may be deemed to be participants in any solicitation of proxies in connection with the proposed merger. Additional information will be contained in the proxy statement to be filed by investors and prospectus to be filed by Citizens with the SEC. With that, I will hand it over to Bruce. Thanks, Kristen. Good morning, everyone, and thanks for joining our call today on short notice. You've obviously seen the announcement this morning about the acquisition of Investors Bancorp. This is an important acquisition for us and it is quarterly compelling when you consider it along with the acquisition of HSBC's East Coast branches and National Online Deposits that we announced in May. Simply stated, these transactions fit together well, a great one two punch so to speak. HSBC provides us with an initial entry business to the important New York City Metro, Washington D. C. And South Florida markets, adding a sizable customer base and a solid deposit franchise. HSBC's net $7,000,000,000 deposit position adds to Citizens' robust liquidity and provides the funding ability to facilitate the acquisition of investors and support strong and prudent loan growth. Together, the 2 franchises business. We will now begin the call to discuss Citizens' business. We will now begin the call to discuss Citizens' business. We will now begin the call to discuss Citizens' business. We will now begin the Q1 of 2019. We will now begin the Q1 of 2019. We will now begin the Q1 of 2019. We will now begin the Q1 of 2019. We will now begin the Q1 of 2019. We will now begin the Q1 of 2019. Where we are already deeply ingrained in the communities we serve. With the completion of these two deals, Citizens becomes a meaningful competitor in the New York City Market, jumping into a top 10 deposit position among retail and commercial banks, and we enhance our strong position in Philadelphia. New York City alone represents about 5% of the country's GDP and includes 2.5% of the U. S. Population. And when you add in New Jersey, Philadelphia, Washington D. C. And South Florida that climbs to about 13% of GDP and nearly 9.5 business. So when you step back, you see that the investors and HSBC presence spans some of the most attractive markets business in the U. S, while providing a solid base from which to advance our digital first national expansion strategy, giving us a strong foundation to drive further growth and to gain scale. We have a great opportunity here to deliver our uniquely diverse consumer lending and wealth capabilities and our broader commercial lending, capital markets and advisory capabilities to this large new client base and business in one of the most vibrant retail and commercial banking markets in the United States. And we'll do this all from a position of financial strength. We expect the Investors acquisition to deliver an estimated IRR of over 23% and meaningful EPS accretion. As you all know, our objective since the IPO has been to become a top performing regional bank that delivers well for our stakeholders. Importantly, adding investors accelerates the achievement of our medium term financial goals by improving our ROTCE and our overall efficiency. We're confident in our ability to execute the integrations of HSBC and Investors. From a leadership perspective. We're happy to welcome Kevin Cummings, Investor's Chairman and CEO and Michelle Sikurka, a member of the Investors Board, to the Citizens Board when we close the transaction. And in order to ensure a smooth transition, our integration teams will be led by Dom Camma, Investors President and Mary Ellen Baker, our Head of Business Services and will include key members of both company's management teams. Our business leaders have a lot of experience managing through change. You'll recall how much progress we've made at Citizens in transforming our technology infrastructure and driving continuous improvement through several successful top programs. We have a very experienced management team, many of whom have come from money center banks, large technology firms and other companies where they have experience with integrations and complex projects. Since our IPO, we have successfully implemented 6 major top efficiency programs. We've transformed our product and service capabilities We've completed 5 acquisitions, including Franklin American, Clarfeld and a handful of commercial banking advisory firms. Step by step, we are executing a deliberate long term strategy to become a top performing bank. With the muscle we've built in this organization, I'm confident we can execution of both HSBC and Investors, while remaining focused on delivering excellent service to our customers and executing on our important strategic initiatives. Before I hand the call over to John, I'd like to welcome the investors' team members to Citizens. I think you're going to find that our companies are an excellent cultural fit. We already share a very deep commitment to the Philadelphia community and we are looking opening new possibilities with you in New York Metro and across New Jersey. So with that, let me turn it over to John. Thanks, Bruce, and good morning, everyone. Let's start on Page 3. As Bruce mentioned in his remarks, there are many reasons we and investors are excited about bringing our 2 companies together. Investors fit neatly as the missing puzzle piece covering the incredibly attractive markets in our physical footprint between New England and the Mid Atlantic. The economics of the transaction are very appealing. We expect to generate strong returns with an IRR over 20% and a 13% return on invested capital. The transaction will be immediately accretive to EPS with accretion of 6.4% expected in 2023. Adding in the benefit of HSBC, the accretion rises to 8.8%. We have identified about $130,000,000 in annual cost savings, which is 30% of investors estimated 2021 expense base and its net of additional expenses for investments in marketing where we need to promote the Citizens brand and upgrading technology capabilities. EPS accretion and other deal metrics reflect the phase in of the savings with about 50% realized in 2022 and virtually all of the cost savings in the run rate by 2023. Importantly, the transaction accelerates our achievement of long term financial goals by improving our ROTCE by about 120 basis points and our efficiency ratio by about 2 70 basis points. Also, we have structured the transaction to be neutral to the CET1 ratio with modest tangible book value per share dilution of about 2.6% and a very reasonable 2.5 year earn back. This assumes $400,000,000 of total pre tax merger costs are 100% incurred at close. In addition to the financial benefits, the transaction advances our overall commitment to the Northeast and expand upon our recently announced HSBC acquisition. The integration of our combined consumer and commercial platforms will provide ample opportunities strong household growth, lending and advisory revenues. While there are always challenges integrating large organizations, We've done extensive due diligence, which will help us as we plan the details. Given the straightforward nature of Investors business model and the resources we are dedicating, we feel confident that the integration will go smoothly. Moving to Slide 4, I'll cover some of the key terms of the transaction. The purchase price is about $3,500,000,000 using a mix of shares and cash. The share exchange ratio is fixed such that investor shareholders will receive $0.297 of a share of CFG common stock plus $1.46 in cash for each investor share they own. From a governance perspective, both our boards have unanimously approved the transaction and we expect to close in Q1 Force Q2 following approval by investors, shareholders and regulatory approvals. For those of you that are less familiar with investors, Slide 5 provides a snapshot. With a total of $27,000,000,000 in assets, Investors is number 7 in New Jersey by deposits. But what's really powerful is their presence around New York City and Philadelphia. These are some of the most attractive markets in the United States with a well educated workforce and above average household and per capita income, particularly in the more affluent areas around New York City and Philadelphia. New Jersey has the 3rd largest share of professionals in the country and the highest share in the Northeast. Importantly, Industrious has about 200,000 customers and they share our deep commitment to their communities. Slide 67 show you what the combination of Citizens, HSBC key and investors looks like on a pro form a basis. You can clearly see on the map on Slide 6, the added presence of HSBC and investors from New York to Philadelphia. This will give us a much broader opportunity to further penetrate the New York Metro market while enhancing our leadership position in Philadelphia. On Slide 7, you can see how the one two punch of HSBC and investors is part of a strategic approach to expanding in the region. HSBC was the first step bringing an initial substantial physical presence in the Greater New York Metro Area and a strong low cost Pozi franchise with a large customer base. This provided the funding flexibility to move forward with Investors. Investors adds to HSBC's branch presence with its attractive middle market and small business customer base and strong customer oriented branch based teams. And beyond the obvious financial benefits of adding HSBC and investors to the mix, I don't think you can overstate the convenience that Investors and HSBC Networks provide for each other's legacy customers when combining their roughly 200 branches in the New York area. As Bruce mentioned, you can see on Slide 8 how the combination of HSBC and investors propels us to a top 10 deposit ranking in New York. Virtually overnight, we will become a meaningful player in New York with the scale and presence to compete for a greater share of business in the largest metro market in the United States. Place higher cost funding in the combined balance sheet. Following the close of the Investors transaction, we will move to further optimize our funding profile. With the migration of Investors customers to Citizens' platform, we will optimize our deposits costs and mix, leveraging our pricing and products and capabilities. Moving to Slide 9, you'll see that investors in HSBC will add about 20% to the size of our loan portfolio. We will remain very well diversified with a modest increase in the size of the CRE portfolio from investors. Then looking more closely at Investors CRE portfolio on Slide 10, the largest component is the multifamily book, which is a well diversified and granular portfolio B Class properties with good risk return dynamics. The remainder of the CRE portfolio is also a granular portfolio focus in local markets where investors have a long history of supporting its customers and community stakeholders. On Slide 11, we are really excited to go on offense with our full suite of consumer and commercial capabilities and take advantage of the benefit of enhanced brand recognition and physical presence in the HSBC and investors' footprints. On the consumer side, we expect a substantial lending and fee opportunity as we deploy our diverse suite of lending and wealth products across these attractive markets. We also expect to improve household growth and retention with enhanced branch sales business and customer experience. On the commercial side, we will expand our middle market and small business lending and fee opportunities as we deliver our market leading capital markets and treasury solutions capabilities across the client base in the region. Investors' local market expertise and personal touch will align well with Citizens' customer focused approach to providing personalized service and trusted advice. Importantly, we believe there is some nice financial upside since we have not included incremental revenue synergies in our estimates of the Investors transaction financial benefits. Moving to Slide 12. Over the last few weeks, we've been engaged in a comprehensive due diligence review designed to ensure we thoroughly assess every critical area of investors. I want to thank the investors team for being so helpful throughout this process. One key area of focus for us was credit, where about 30 of our most seasoned credit risk Professionals' examined Investors Loan Book, particularly focused on areas of perceived higher risk and concentration such as their larger client relationships, Commercial Real Estate and other parts of the portfolio that may have been under added stress due to the pandemic. With respect to the commercial portfolio Our team performed a significant loan file review with analytical coverage of the entire loan portfolio, including a review of delinquency and forbearance data across the portfolio. We also reviewed all loans over $5,000,000 that were low pass or criticized. As a result, we are comfortable that we understand the risk in their portfolio. After completion of the process, we expect to take a credit mark on the investors portfolio of $325,000,000 or approximately 1.48%. In addition, there is a CECL double count of about $160,000,000 that is fully included in the numbers we present. We also expect a net interest rate markup for loans as well as other balance sheet categories of $180,000,000 This resulted in net positive mark overall of approximately $20,000,000 which will be amortized in over approximately the next 5 years, which varies by balance sheet category. Therefore, the impact on EPS accretion of 6.4% for 2023 is minimal. Beyond credit, we completed due diligence for key risks, including legal, BSA, AML, compliance, market, liquidity, cyber and operational risks. Our due diligence process was deliberate and thorough and confirmed that Investors is a well run franchise. I also want to reiterate that we have a high degree of confidence in our ability to successfully integrate both acquisitions and over time deliver the same strong offerings and financial performance in these geographies as we do in the other major metro areas that we serve. We know these markets well and the business models are relatively straightforward and consistent with our core capabilities. It's worth noting that we share several commercial platforms with investors including a common client relationship platform. We also have substantial overlap with some of the vendors we use for important areas across deposits and lending. So we are very familiar with those platforms and the transition requirements. Moving to Slide 13, I'm proud to say that both Citizens and Investors share a deep commitment to serving our customers, supporting our colleagues and communities and moving forward with our ESG priorities. Through the Investors Foundation, they have made a significant impact through generous Fusion's Pacific Mind and Organizations in New Jersey, New York City and Long Island. We look forward to joining their efforts and continuing to foster strong ties to the community. So in closing, I want to reiterate why we are so excited about this transaction. First, the financial metrics are very attractive with immediate EPS accretion and strong returns that are well above our cost of capital. ROTCE and efficiency uplift are compelling and accelerate the achievement of our medium term financial goals. When combined with HSBC, the physical presence in attractive markets and the large current and potential customer base opened very significant opportunities strategic agenda in the region and nationally. And with that, I'll hand it back to Bruce. Okay. Thanks, John. Brad, why don't we open it up for Q and A? Thank you. Mr. Zvan Sondheim, we are now ready for the Q and A portion of the call. By repeating the 1 and 0 command. One moment please for our first question. And our first question comes from the line of Ryan Nash with Goldman Sachs. Please go ahead. Hey, good morning, Bruce. Good morning, John. Good morning. So, Bruce, I think many of us know that ISBC had previously been for sale. So Can you maybe just give us some color on the deal process? Was it competitive bid? And second, when you look at the CFG product offering in terms of loans and deposits. It does look somewhat different than ISBC. So maybe you can either you or John expand on John's comments about your ability transition the balance sheet over time and what you envision it looking like over the medium term and do you see significant run up in that portfolio? Thanks. Yes. Sure, Ryan. So to us, the important first step that we wanted to take To really go after the New York Metro opportunity was the HSBC branch acquisition and also securing the online deposits and then presence in Washington and Florida. And so that to us was very attractive. It was well price and it brought a very low cost funding base, which is about 9 basis points on a net $7,000,000,000 of funding. Once we secured that, it made a lot of sense to us to initiate conversations with investors and see if we could create the so called one two punch because what investors brings is it certainly business. The branch footprint brings more consumer customers, but also brings a very attractive small business and middle market customer base as well. So We saw that as a great opportunity and we're able to over time reach agreement on terms that I think are good for both sides and also kind of get general agreement on how these things will fit together and what our future strategy in terms of our consumer banking offering. So we have a great digital first customer experience that we've developed. We offer great advice to customers. We have a very full product set across all major lending categories. And so we'll be able to do more business with both these customer bases over time and hopefully turn New York into something as successful as we have in Boston and Philadelphia. Similarly, this works for the commercial side as well. We have some corporate coverage bankers working out of New York, but this will certainly amplify our branding and our presence in the region and then allow us to bring many of the products and services we've developed for customers from small business up to bigger mid corporates to bear with this customer base and give us, I think an ability to grow market share in the region. So we like all those aspects of the deal. In terms of the balance sheet, we have somewhat more commercial real estate on investors' balance sheet than we have on ours, but I don't think that's an exception broadly, if you look at banks in the size category. So we're comfortable with the risk in how they've invested in Commercial Real Estate. And I think over time, you'll see commercial real estate become a smaller element of the balance sheet as we grow the consumer lending areas and also as we expand in the commercial side of the house. So that investors have been on that journey. They've been migrating away from commercial real estate. They've been growing C and I. I think we can help accelerate that and then we can bring commercial lending opportunities to the customer base that they currently don't offer. So maybe I'll just turn it over for John and he can talk a little more about the second part of your question on the balance sheet. John? Yes. Thanks. So good question, Ryan. I mean, I think really you would see us migrate both sides of the balance sheet on a sort of target balance sheet basis. If on the asset side, you heard from Bruce, I guess I'll call it the back book and the front book. I mean, I we expect that the front book originations going forward will look different than what the back book is that we're going to be inheriting at close. And I'd say you'll see a lot more emphasis and mix in the front book on C and I over time as we build that playbook and bring our vast and diverse capabilities in the commercial business under Don to the region and marrying with their relationships. And then same on the consumer lending side. So I think you'll see much more of a balance between Consumer and Commercial. Still an orientation towards commercial, but still a much more of a balanced sort of go to market approach on the front book with consumer lending and Commercial on the asset side. On the liability side of things, similar concept. They're a little sort of lower weight, non interest bearing than we are. They've got some deposit categories that we would probably It will look differently in the front book. We've been one of the leading we've had the leading growth in non interest bearing deposits over the last several years versus peers and you'll see much more non interest bearing deposits, much more lower cost deposits, relationship based deposits and so you'll see cost of deposits converge to where we are over time with their deposit mix converging to where we are over time. And it can't be underestimated how the opportunistic HSBC acquisition really fueled the ability to do this on day 1. And so that gives us a huge jump start towards the target balance sheet. And last point I'll make is that, as you may know, the Investors balance sheet is liability sensitive. And so you sort of look at that coming on as a way to sort of and We have our asset sensitivity is around 10.7% right now. And so that there's some asset sensitivity there to monetize that works very nicely as well with customers on the other side. Got it. Thanks for all the color there and I was about to ask you on the combined rate sensitivity, John, I think you talked about CET1 being neutral. Can you maybe just talk about how buybacks and capital management are factored into the equation here? And I'm Assuming it's safe to say that we are on hold until the deal closes, but how do you anticipate managing CET1 in the short and intermediate term? Thanks. Yes, a couple of quick points, Bruce may add here. But the first, after shareholder vote, We can open up, we don't have to wait till close on buybacks. So just a minor clarification there. And then it's because it's SEK1 neutral, it really maintains all the flexibility we had pre deal That really would run the same waterfall where our focus is on organic deployment of capital and maintaining our dividend at the top tier. And then we look at additives and compelling fee based bolt ons that have always been part of our story and for which we've mentioned that there's an opportunistic pipeline that remains there. And then we're into buybacks. So given the fact that we really haven't levered at the CET1 levered the CET1 ratio as a result of this deal, all that flexibility AIMS. And it's part of one of the attractive parts of the deal that we don't have to we wouldn't have to step off. If loan growth is much higher, maybe buybacks be a lower. If loan growth is a little lower, maybe buybacks will be a little higher, but we're back with the ability to move forward with that subsequent to shareholder approval. And our next question comes from the line of John Pancari with Evercore ISI. Please go ahead. Good morning. Good morning. Just a follow-up on the balance sheet positioning. So just to confirm, based upon what you just walked through. You have no planned actions then on the balance sheet repositioning in terms of deliberate portfolio runoff or portfolio sales or any other type of business exits? No, there's no planned exits. It will be over time the front book profile looking different than the back book and we'll migrate the profile over time to more C and I and more consumer lending, but still with a commercial and overall commercial weight, which will keep us our profile on a pro form a basis on a combined basis about equal weight fifty-fifty commercial consumer maybe with a tiny bit more commercial given the addition of investors. Okay, got it. And then secondly, I know you indicated that the cost saves are net of investments that you plan on the technology and marketing branding side. Can you quantify what those investments are that have been factored into the one $130,000,000 of cost saves and separately are there any other costs that could come about in terms of investing in the business as you integrate. Thanks. Yes, I'll take that and John can maybe add to it. But fundamentally, John, we wanted to make sure when we thought about the transaction that We're going into a new region and we're going to have to step up and enhance our brand image in the region. So That's one of the things that we allotted additional spend for. And further, we also want to make sure that we have upgraded some technology capabilities to sync up with us. And so that's probably the other big thing. The gross saves are closer to 35% roughly. And so there's, I'd say, a 5% -ish reinvestment that comes as a slight dissynergy, a slight offset, but we're pegging the net synergies at 30% and have confidence that we can deliver that. John, is there anything you want to add? No, I think that's well said. And I'd say that over time, you were also asking John whether there's additional investments we might consider. Yes. And I think that that's all in the category of if we want to invest in the region and add to really turbocharge revenue synergies, etcetera, but all That's outside and would be exciting to be able to consider and move forward on with and would have excellent return metrics and business cases in and of themselves. So this is a recurring built in cost on top of their recurring built in cost base. So that's a meaningful addition of around 5% or so to their expense base to really kind of enhance our capabilities in marketing that we think will be needed to enhance our brand. Yes. And to that point, John, we have not factored in revenue synergies, but if this deal is really going to be a great one and be a home run. Then ultimately, we want to really penetrate the opportunity in the region and that will require down the road additional investment in product marketing to gain customers or to gain cross sell. But we have the playbook on that. Business. We've been doing that in the rest of our footprint and so feel quite confident that we'll have success there. And that's the aspiration ultimately is to really become a very competitive force in the region through these two acquisitions. Got it. All right. Thanks for taking my questions. Appreciate it. Yeah. And we do have a question from the line of Ken Usdin with Jefferies. Please go ahead. Hey, thanks. Good morning, guys. Just a couple of follow ups on the right side of the balance sheet. Given the investors historically more thrift like orientation. In past Frick like deals, we've seen a good amount of just natural runoff of what were often single product type customers. And given that they do have that higher cost of funds, just how do you intend to try to manage that, retain customer base. And I know you have the HSP flexibility to be able to kind of mesh that all together from a Citizens' top down perspective. But How do you think about that and how do you kind of balance retention and attraction to the Citizens franchise visavis the existing customer Yes. Thanks, Ken. Good question on that. I mean, it's we have a couple of thoughts I would add. So when you think about HSBC's 9 Basis Point Cost of Funds. And if you look at HSBC Plus Investors, Those two together and I guess their loan to deposit ratio is about 20 some percent on HSBC side and it's I I think it's 107 or somewhere around that on the investor side of things. You put them together, that sort of pro form a bank that's going to be brought into our platform in early 'twenty two has an 80% LDR, which is spot on top of where we are. And so even without massive runoff, you just put them together and they're already at 80% LDR and that allows us lots and lots of flexibility to reshape the front book, such that we've been developing deposit analytics Ever since the IPO to try to converge our deposit costs to peers, I think that it's our expectation that by the end of this year we'll get there on the legacy CFG platform. We're going to take that playbook and run the same playbook that we've been running over the last 3 to 5 years and do the same for investors and HSBC is already there. So really this we could really just sort of see a very straightforward path to migrating deposit mix up from non interest bearing, which I think in investors is closer to 20%, up to our level, which is near 30 and getting the deposit costs converted or converged over time to our level, Not diluted. This will not be our expectation is that we will not be diluting our deposit costs or mix as a result of these two acquisitions in early 2022 and that's exciting to be able to do on the right side of the balance sheet. So that's our plan and I think Bruce may want to add. Yes. So one thing I'd add to that, Ken, is that we do like the demographics of the customer base. So they SKU towards mass affluent, affluent given the regions that investors serves. And so that's really our sweet spot in terms of the offerings that we have for the rest of the footprint. And so we think there's real potential there to deepened relationships with the customer base over time. Brendan, I don't know if you wanted to add anything as to kind of where you see the opportunities. Yes, I'd just say that in the markets that Investors is in, John's front book and back book is an important dynamic to understand that we expect to grow households in the market, which should give further growth potential for low cost deposits to reshape the balance sheet and our diversified capabilities is significantly different than both HSBC and Investors' core offerings. So we should be able to lever that to not only deepen, but also to solidify these relationships and reengage these customers in a very different way where maybe some of them had multiple bank banking Chips, given the lack of diversity in some of the product offerings. And Citizens coming into the market, I think, can have a very attractive offering to not only grow, but solidify and deepen with these customers. So we've got a lot of confidence that as John and Bruce both pointed out that the playbook that we've developed is well tested and we think we'll get some medium term revenue synergies that aren't baked into this model and we got a lot of confidence on that. Great. And John, one follow-up on the numbers. You mentioned that all of the items were included in your map. I was just wondering if you could details a little bit more. How much of the restructuring charges or the day 2 provision is baked into your tangible book estimate? And your actually that's the question. Yes. 100% of the merger charges And 100% of the day 2 CECL double count are baked in to our dilution calculation. Okay. And sorry, I forgot one more on the right side, if you don't mind. Do you also have the ability on the borrowed funds? They have $4,000,000,000 earning $210,000,000 Is that something you can Get rid of right away upon closing like and is that built into your model expectations? Yes and yes. We can move forward on that. They've got some high cost flub outstanding as well as some swaps that are underwater on a net basis that We would plan to basically a close move on from. So, and that's built in to the merger costs as well as just the synergies going forward. Okay. Thanks guys. They're just having The big liquidity position we do at Citizens today gives us a lot of flexibility in that regard. Understood. Thank you, guys. Yes. And our next question comes from the line of David Conrad with KBW. Please go ahead. Yes, good morning. Couple of quick questions. One, I'm sorry if I missed this, but John, you talked about asset Tivity being around 10.7% for CFG. What do you estimate the pro form a asset sensitivity would be? And then also Would this change your hedging strategy or hedging program going forward? You added a little bit here earlier this year. Would you reduce that need to provide to fund fixed rate hedges. Thanks. Yes. Big picture, they are liability sensitive. And so from that perspective, they would take our 10.7% down to about 9%. And so we're still highly asset sensitive and lots upside for an eventual rising rate sort of outcome going forward. So that's the big picture. As we may have mentioned before, we sort of have this dollar cost averaging approach as rates rise and we have some opportunities ability to do some hedging earlier in the year. We got about $8,000,000,000 of CPIC swaps done earlier this year And that offset some of our asset sensitivity, but then other balance sheet moves basically took us right back to where we were. So we really have a lot of firepower left and in the rising rate environment. But net net over time, As we try to migrate to the low single digits because we get closer to neutral as rates rise, the fact that we brought on this portfolio would obviate the need to use Receiptic swaps to take us down to the target destination. And I'd much prefer to Do that where we monetize asset sensitivity with customers on the other side than synthetically using receive fixed swaps. So this is very attractive It takes us part of the way. We'll still be looking to layer in some swaps opportunistically as we see the curve flex a bit. But Yes, moving from 10.7% to 9% and doing it in this fashion makes a lot of sense. Great. Thanks. And maybe one follow-up on the 6% EPS accretion. Just curious in that model, you talked about the enhancement in some of the federal loan advances. But in terms of the deposit and getting the cost down there, what's in the model for that accretion in terms of lowering the deposit cost for investors? Yes, that's not in the model. So that's upside down the line that we have not included. Yes. And we do have a question from the line of Ken Zerbe with Morgan Stanley. Please go ahead. Great, thanks. Actually, that last question was very similar to what I wanted to ask about. But if we just go to a little more detail, sorry, did you just say that Remixing the investors deposit base was not in your EPS accretion, because I'm trying to figure out like it seems that The HSBC deposits are such a great use of funds to repay the or to get rid of some of the higher cost ISBC deposits. I'm just trying to figure out like how that's because it feels like that should be in your EPS accretion. No? Yes, I mean, I think I'd describe it this way. Pulling in HSBC by itself had an EPS accretion profile associated with it that would take our 2023 accretion from 6.4% to 8.8%. So that's just layering in HSBC. But in terms of we're not going to stop there because we have 9 basis points of deposits coming in from HSBC, well optimized, We're going to turn our playbook to the investors' deposit base and we're going to optimize that deposit base and Lower That Deposit Cost of Funds, which is a and converge it to our own. All of that is not in the model and is not part of the 6.4% or the 8 Got it. Okay. All right. I think that's helpful. And then just more broadly speaking, I guess what was the primary traction Investors. I mean, I just I get the geography aspect of it, but why investors versus other banks, say, in a similar geographic region? Thanks. Yes. I mean, I think if you look at it, Ken, it's the geography is to us very compelling and then The orientation that they've kind of worked towards of building up and capabilities in small business and in the middle market is a nice complement to what we Gain with HSBC, which is a pure retail operation. So that to us made a lot of sense. They also have a fairly thick branch system, so 130 branches in New York Metro. HSBC came with 66, I believe. So we're pushing 200 branches in the Greater Metro area, which will offer more convenience for both customer bases. And so we think that's also Very attractive. Obviously, the world's moving fast to digital, but physical presence makes a big difference and convenience is also highly rated by customers. So those are really a couple of the aspects that work. And then I'd say also the deal math works. So this is a transaction that we could afford that is accretive and is ROTCE improving and we think it's low execution risk. So We understand the businesses they're in. We understand their balance sheet. We've done a lot of diligence on that. And so we think we can affect These transactions in reasonably short order without the high degree of execution Makes sense. And then sorry, just one last question for John. You mentioned you could buy back stock after the shareholder vote. Do you have an estimate in terms of when the shareholder vote might be? It's early Q4 is the plan and we'll be keeping you updated about that as that unfolds. Perfect. Thank you. And we have a question from the line of Ebrahim Poonwala with Bank of America. Please go ahead. Good morning. Hi. I guess Bruce just wanted to follow-up, you in the past talked about the NGT and Transforming the Technology Infrastructure as part of Top 6. Just talk to us one in terms of just remind us where Citizens' in terms of the core systems both on the lending and the deposit side and where Investors' is? How does the deal both this and HSBC either they expedite or slow you in terms of the whole NGT process? Yes. That's the good news here is that we've made huge amount of progress already on NGT and We're migrating our infrastructure to the cloud. We've streamlined and refreshed our applications. They're open facing, so we can take in APIs. And So having made those investments puts us in very good position to complete these two acquisitions. We think the HSBC conversion will be relatively straightforward. We'll migrate off of their technology platform onto ours and the online bank will actually move on to our next generation digital platform. So We're excited by that. And then the good news on investors is that they're using a suite of platforms, forms that align very closely with ours. And so there's quite a significant overlap across deposits, lending, sales force management, etcetera with our suite of products, which will simplify the conversion process. Got it. And I guess another question around you talked about this helps you better target some of the mass affluent segments. When you think about Citizens' strategic positioning in the Northeast markets, Do you see yourself taking market share from the big banks or are you looking at some of the smaller regionals where Citizens probably has a much better product Street then some of them when you think about acquiring new clients. Yes, I think it's a combination of both. And so what we've seen over time in our Markets. We have a focus on really being our trusted advisor on their life's journey. So we try to bring a product suite and advice capability to the customer that really resonates. And so that's why we've been successful in gaining market share in our other markets when we look at Boston, Philly and throughout the footprint. And I think there's room for that in the Greater Metro Area as well. So some of that will come from the bigger impersonal banks, if you will, and some will come from the smaller community banks that have limited offerings. But we feel quite confident that we can, As John uses the phrase, take the playbook and apply it into the region. And I think that's similar on the commercial side as well where we're trying to be a trusted advisor to companies as they navigate their business challenges and try to grow their businesses. We bring the expertise within the house and great product sets and technology solutions to bear to help make those Companies more successful and we've been able to compete effectively against the smaller players all the way up to the mega Thanks and continue to gain share there as well. So anyway, we think we can do it. It's going to take some time. There's certainly some work in front of us, but We're optimistic and confident in the future outlook. Got it. Thanks for taking my questions. Yeah. And we do have a question from the line of John Pancari with Evercore ISI. Please go ahead. Hi, thanks for the follow-up. Just one quick one. Bruce, you mentioned the low execution risk. Can you just talk about the confidence on the regulatory front in getting the green light on the deal. I know it's not the largest transaction, but still Given Biden's quarter on this, it draws a little bit of attention to it. So just want to get your thoughts there. Yes. Obviously, I can't prejudge where the regulators come out, but we feel good about strategic logic, the financial logic and then the low execution risk and how we've structured the governance over the integration of both deals. So I'll kind of leave it at that and say, I think the regulators as they get into the review process results. We'll see that this has been well thought out, makes a lot of sense and it's not going to take us off our game of the big change agenda and the strategic investments that we're making. We think we can keep all those running on track. With respect to the Biden executive order, That's out for comment and there'll be some time before that actually comes into play. So I don't think it necessarily is going to impact deals that are announced in the short term. We'll have to just monitor it as to whether if there's changes in regulatory appointments if that does have an impact. But For a deal this size with the 2 of us combined or the 3 of us, I should say, gets close to $220,000,000,000 in I think that's not top of mind in terms of creating a kind of concentration in the banking industry as should be the focus. So anyway and the last thing I would say also is that Bank Mergers are already heavily scrutinized and so we understand what the process is today and we think we can navigate that successfully. Okay. That helps. Thanks Bruce. Yeah. Okay. I think, Brad, that's it for the questions. Let me thank everybody again today for dialing in on short notice. We're very excited about the combination of investors and HSBC GC branch acquisition. We think it's going to strengthen our franchise and provide us with some fresh momentum. So thanks again. Have a great day. And that concludes today's conference call. Thank you for your participation. You may now disconnect.