Blackstone Teams with Former Citizens Bank CEO

Former Citizens Financial chief Steve Steinour is in talks to raise a private equity fund in partnership with The Blackstone Group (BX), with a focus on distressed banks and other financial services companies. Sources say the partnership is still in its early stages, and that both sides recognize the difficulty of raising a “multi-billion dollar” fund in the current environment.

Steinour originally joined Citizens in 1992, and a decade later was put in charge of the firm’s expansion south of New England (including Pennsylvania retail banking ops bought from Mellon for $2 billion). Next came a vice chairmanship, and the CEO role in 2005, when Larry Fish kicked himself upstairs.

Steinour officially left Citizens this past spring, to join Boston-based alternative asset manager CrossHarbor Capital Partners. His goal was to help the real estate-focused firm launch a private equity program, and the Blackstone talks began sometime later. It is unclear how the new fund is being branded, but a source says that Steinour himself “will remain under the CrossHarbor umbrella,” with Blackstone as an affiliate on the actual fund. Not quite sure how that will work — or how the financial split is designed — although the Riverstone/Carlyle platform may provide a model.

Steinour currently is joined by one other former Citizens big, and is expected to staff up if capital commitments roll in. He continues to live and work in the Philadelphia suburbs, where he once expressed interest in opening a CrossHarbor satellite office.

peHUB was told that he spends Mondays in the Boston headquarters, but he did not return messages left there yesterday morning. We also sent an email last Friday. A Blackstone Group spokesman had no comment.

Megan Davies of Reuters contributed to the reporting of this post.