Citi's Cities

David Enrich says that Citi is retrenching its consumer operations in the US:

Executives at the New York company plan to narrow the focus of Citigroup’s U.S. branch network to six major metropolitan areas, according to people familiar with the situation. Citigroup also will limit its overall consumer lending in the U.S. primarily to credit cards and “jumbo” mortgages, while catering largely to affluent customers.

This makes a great deal of sense: even now Citigroup (C) has many fewer branches than the likes of PNC (PNC) and BB&T (BBT), and with the collapse of the ill-fated Wachovia acquisition, its dreams of becoming a retail powerhouse in the US are clearly dead. Citi was never very good at old-fashioned branch banking, and it should indeed play to its strengths rather than trying to be all things to all people.

Citi’s main strength, globally, is banking the affluent, largely through its extremely strong Citigold brand. The cities it’s concentrating on — New York, Washington, Miami, Chicago, San Francisco, and LA — are the main global cities in America, the ones that Citi’s international client base is most likely to visit. Philadelphia and Dallas, though lovely places, aren’t global in that sense, and if Citi has less than 1% of the deposit base in such cities anyway, it’s easy to see how it could make the decision to sell those branches to a strong local franchise. (It probably won’t, though: Citi sources tell my colleague Matt Goldstein that although the bank will indeed concentrate on the big six cities, it’s not going to leave Philly, Dallas, Houston, or Boston.)

I’m sure it’s unrelated to the WSJ story, but last night I got an email from the branch manager of my Citibank branch, the one at 120 Broadway in lower Manhattan; the subject line was “Our commitment to New York starts here.” She included her phone number, so I gave her a ring, and she gave me some astonishing numbers. That one branch alone, which includes all the accounts which used to be held at the World Trade Center branch, has over 30,000 customers, and a deposit base of — get this - over $1.5 billion. (That’s 75 times the size of my local credit union.) Its customers are a very diverse and international group of people, and, with an average of about $50,000 on deposit apiece, are clearly pretty well off.

That kind of customer base is clearly what Citi wants, and what it’s good at; you can see why Citi would want to concentrate on jumbo mortgages.

It’s true that this news means Citigroup is pulling back from banking the ordinary Americans who bailed the bank out last fall. But frankly those ordinary Americans were always better served by the big retail powerhouses anyway. Retail banking is not Citi’s strength, except for possibly in Mexico and Poland. It should stick to banking the global affluent, who stuck by it through all the troubles of the past year, and who remain incredibly profitable for the bank.

Comments

[ResourceWise:]

In addition to Poland and Mexico, Citi has well established and successful Retail Banking businesses in over 50 countries around the world including Argentina, Australia, Belgium, Brazil, Canada, Chile, Czech Republic, Egypt, Greece, Hong Kong, India, Japan, South Korea, Malaysia, Philippines, Russia, Singapore, Taiwan, Turkey, UAE and the UK. The US centered sub-prime crisis and the subsequent collapse of financial markets have obscured the underlying strength of Citi's global franchise. As they get their act together under the Citicorp banner and put the customer back at the center of their business model, I hope they will re-establish their global position as the world's local bank - a position they lost to HSBC after their disastrous merger with Travelers in 1998.

Sep 24 01:57 PM

[whisperonth...:]

If my bank is not in my area, I would have to choose a different bank. It's much easier to establish a relationship with a bank right now than it is to follow a bank to a different area. There are many things I do AT the bank that can not be done electronically. Two of those, for example, are: a) Use my safety deposit box and b) Get a Medallion Guarantee.

On top of that, I know the bank tellers (or whatever they call them now, CSRs?) by name and they know me by name, so losing them would be like losing my favorite local market. I would miss them, but I would not follow them. I would move my account.

Sep 25 09:26 AM