Welcome to Way forward for Finance, the place Fortune asks outstanding individuals at main firms about their roles on this huge, ever-changing ecosystem—and what all of it means for a way we use cash.
Residents Monetary Group, Inc., headquartered in Windfall, R.I., had $222 billion in property as of Dec. 31 because the 14th-largest bank in the U.S. John F. Woods joined the agency in 2017 because the EVP and chief monetary officer, and was named a vice chair of the financial institution in February 2019.
In a latest dialog with Fortune, Woods, who’s additionally held CFO roles at MUFG Americas Holdings Corp. and JPMorgan Chase, mentioned his experiences in reallocating capital and liquidity to help funding, the altering roles of CFOs, and embracing the newest in know-how to, amongst different issues, meet evolving buyer expectations.
(This interview has been edited for size and readability.)
How would you describe your function at Residents?
My accountability is de facto to allocate sources. We’ve got 4 massive swimming pools that we use to conduct enterprise—capital, liquidity, know-how investments, and working bills—throughout your entire platform. What I mainly do is orchestrate the very best and finest use of all of these sources by partnering with enterprise leaders. For instance, if enterprise leaders want to rent lots of people, that’s working bills, or if enterprise leaders want to develop their enterprise by making extra loans, I’ve to allocate capital and liquidity to help that mortgage. But when there are extra requests for capital and liquidity than we’ve out there, then my job is to rank these alternatives and decide about which of them get green-lighted.
There’s an infinite curiosity in constructing technological capabilities as nicely. It could possibly be throughout the board, when it comes to constructing new methods, new interfaces with our clients, extra investments in our cell app, the web site, and even generative AI. And the query is: What’s the portfolio of know-how investments which is able to join with our strategic imaginative and prescient? There are extra requests for know-how capital than we’ve out there, so it’s my job to rank these.
It sounds such as you work collaboratively throughout all departments. Does that additionally make you a steward of the corporate’s technique as nicely?
The evolution of the CFO function over the previous decade or extra entails an intensifying expectation that the CFO is a companion to the CEO—and to the enterprise unit leaders on deriving technique.
The expectation {that a} CFO has orchestrated an atmosphere whereby our monetary statements are full and correct, generated on time, and all our regulatory supplies are submitted with a excessive diploma of accuracy—the entire pipes and plumbing of monetary info working—is now desk stakes. It’s simply anticipated that occurs. The worth {that a} CFO is de facto including is artfully allocating scarce sources to realize strategic aims, and to advance initiatives that may have one of the best return for traders and shareholders.
One other a part of my function is that of an exterior spokesman, with respect to the path of the corporate. The CEO is the first driver of managing the exterior message, however I’m a quick follower with respect to how I work together with the fairness investor neighborhood and in articulating the path of the corporate.
How was your expertise beginning out at Residents?
I joined a yr or two after the IPO, so I can’t say that I used to be really in on the bottom flooring, however I used to be fairly shut. So it was a yr or two after the IPO, and Bruce’s imaginative and prescient was to take this underperforming subsidiary of a overseas financial institution and remodel it right into a top-performing financial institution in the USA. And, actually, the imaginative and prescient was compelling. I made a decision to hitch, was impressed by the flexibility to roll your sleeves up and be a part of a progress story.
What we had then was a really restricted product set throughout business—primarily with a lower-quality deposit profile of customers. And what we’ve performed since then is construct a extremely aggressive platform to serve all of our buyer segments—a superb deposit platform, a implausible product set throughout retail, enterprise banking, non-public banking, and middle-margin business. It’s been an unimaginable story.
Can we speak about how Residents shocked business watchers in 2023 by launching a personal financial institution with the acquisition of arguably First Republic’s strongest property—its non-public bankers?
For plenty of years, one among our strategic aims has been to have the ability to serve high-net-worth people. We did that some time again once we acquired an organization referred to as Clarfeld. That created capabilities to offer recommendation to the high-net-worth buyer segments. However we had been unable to scale that platform due to the necessity to have sufficient bankers to work together with this buyer phase. However the alternative arose when First Republic began to get into bother final spring.
We had a possibility to bid on buying First Republic as an organization. We didn’t win that bid—JPMorgan did. Nevertheless, as a part of that course of, we grew to become very interested in the enterprise mannequin at First Republic. And plenty of the non-public bankers who labored at First Republic didn’t need to work at a really massive financial institution—that’s the explanation they labored at that financial institution within the first place.
We had been contacted by plenty of non-public bankers that used to work at First Republic, they usually mentioned, “Listen, we would love to be able to maintain our approach to serving high-net-worth individuals, but we would like to do it outside of the very largest banks, and we think Citizens would be an interesting opportunity.” It went in a short time from a dialog with a handful of individuals to, abruptly, 150 individuals who determined that they needed to hitch the Residents platform.
We had a whirlwind a number of weeks of negotiations and had been in a position to rent individuals in California, Boston, New York, and Florida. We’re going to be establishing store and opening up branches in all of these geographies. We count on that the non-public financial institution goes to generate important returns. We simply launched formally within the fourth quarter of 2023, and we’ve over a billion {dollars} of deposits already.
What does the way forward for finance, particularly in banking, appear like to you?
We’ve got to think about ourselves as a lot as a know-how firm as we’re a banking group. We’ve got many extra engineers and knowledge scientists on workers than we might have had previously. Our interactions with clients stretch nicely past our department footprint—a buyer might determine to stroll right into a department at some point, and leaving the department count on to have the ability to work together with us on their cell system, after which might name our name middle and count on the decision middle to know what simply occurred on the department.
Like utilizing the Uber app, for instance, they count on the identical stage of effectiveness on a banking app. I feel banks have developed to grasp the have to be extremely agile and extremely progressive.
The opposite half I’d add is that banks must tackle what’s occurring within the regulatory atmosphere. Prospects will need to work together with fewer banks right this moment than they used to previously. So with the ability to have your transactions processed shortly and reliably—all of that’s desk stakes.
Banking merchandise themselves are starting to be embedded inside different applied sciences—we name that embedded finance. So in case you are partaking, not along with your financial institution instantly, however you need to facilitate funds, however you’re not on a financial institution app, that’s mainly being powered by banks behind the scenes. One thing that we’re preserving an in depth eye on is the right way to stay related in a world the place banking merchandise at the moment are being embedded outdoors of banking functions.
