Citigroup drops in branch rankings as it shifts focus upmarket

Lender falls out of the top 15 banks by branches in the United States as it chases wealthy

Citi pivot: the group, whose Irish businesses are based on North Wall Quay in Dublin, hopes its shift will boost returns to shareholders. Photograph: Alan Betson

Citi pivot: the group, whose Irish businesses are based on North Wall Quay in Dublin, hopes its shift will boost returns to shareholders. Photograph: Alan Betson

 

Citigroup has dropped out of the top 15 banks by branches in the United States, underscoring its postcrisis shift upmarket as it focuses on serving wealthier customers at home and abroad.

Under its former leaders John Reed and Sandy Weill, Citi aimed to become a financial supermarket, offering everything from current accounts to multibillion-dollar derivatives contracts, all under one roof. But since its near-death experience during the financial crisis the New York-based bank has tried to build its wholesale and credit-card businesses within the US while radically trimming its retail banking network around the world.

Citi, whose businesses in Ireland include treasury and trade solutions, securities and fund services, corporate and investment banking, and capital markets, ranked 16th by number of branches in the US, with 756, at the end of June last year, according to data from the Federal Deposit Insurance Corporation, putting it in a peer group with Huntington Bancshares, of Alabama, and Woodforest, based in Texas.

In 2009 Citi ranked five places higher, with 1,049 branches, rubbing shoulders with Fifth Third, of Cincinnati, and Toronto’s TD, according to S&P Global Market Intelligence.

“We’re not going to be competing everywhere, with a mass branch-bank offering,” John Gerspach, Citi’s chief financial officer, said at a conference in March. He noted that the bank’s US network is now confined to six cities: New York, Chicago, Miami, Washington, DC, Los Angeles and San Francisco. “It’s where the people with the money live, and we feel pretty good about our ability then to generate good returns going forward.”

Citi’s pivot towards more affluent customers is part of an effort to boost returns to shareholders, which have been squeezed in recent years by low interest rates and tougher regulatory standards on capital and liquidity.

Even as Citi has aggressively wound down noncore assets, returns on equity have languished over the past three years, at an average of 6 per cent, well short of the peer group, at 9 per cent.

Reducing the branch network comes amid an industrywide shift to digital, with many customers preferring to handle simple transactions online or on a mobile device.

Bank of America has come down, too, from more than 6,200 branches in 2009 to 4,753 in the middle of last year, according to the FDIC. But unlike BofA’s consumer arm, which still aims to serve the mass market, Citi is seeking “to be the pre-eminent bank for the emerging affluent and affluent consumers in large urban centers”, according to its annual report.

Outside the United States Citi is now in 19 countries, down from 45 at the peak, in 2007, and continues to close branches. Last month the bank said it would shut three of its four outlets in London, keeping open the Citigold and Citigold Private Client centre at its European headquarters, in Canary Wharf.

The bank said: “In London, as in many major cities around the world, wealth management client centres best suit our client base and their increasing preference for digital channels.”

Across the group the global branch count fell 7 per cent last year.

“You’re not going to find a branch of ours in Wyoming,” Mr Gerspach said at the conference. “Love Wyoming – great place to visit – but we don’t have branches in Wyoming, and we’re not going to start by opening one branch in Wyoming and then try to, on an organic basis, grow at a branch network that’s just not us.”

Wells Fargo tops the list, with 6,214 branches in the US as of June last year, followed by JPMorgan Chase, with 5,425, then BofA, according to the FDIC. – (Financial Times service)