That didn’t take long. Vikram Pandit’s quick decision not just to slow Citigroup’s (C) branch expansion plan, but to actually reverse it by pulling out of several markets the company had only recently entered, shows just how dismally those new locations were doing. The numbers must be so awful that the move was obvious—particularly since Citi has been at its expansion for two years now. What the heck was Chuck Prince thinking? As it is, Citi's New York branches perform terribly. Why would anyone expect the company would do any better in other markets?
In any event, Citi is smart to abandon markets like Tampa and Philadelphia, where by all accounts it wasn’t moving the needle. (Deposit market share in Tampa at the end of 2006, for instance: 0.02%. It’s as if they sprayed the interior of the branches with customer repellant.) Word is that the company is doing better in Boston, but mark me down as skeptical. Of Citi’s Boston-area 18 branches, 11 are less than six months old. It may just be too early for Citi to conclude definitively that those locations are flops, too. I can’t imagine any competitive edge that Citi might have in Boston that it wouldn’t also have in Philadelphia. Yet after plugging away in Philly for two years, Citi’s deposit share there is all of 2.25%. My prediction: additional closings are coming.
More encouraging, Pandit’s decision to reverse the branch expansion shows a willingness on his part to rethink prior management’s core strategies. That’s good. Regular readers know my prescription for what ails the company: a breakup into separately traded, focused businesses. Vik Pandit might not be there yet. But his readiness to stop doing clearly dumb things is a step in the right direction.
Tom Brown is head of BankStocks.com.