Just a year ago, Citigroup Inc. was weighing acquisitions aimed at making it a retail-banking giant across the U.S. Now it is retreating.
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.
"At the end of the day, we are not going to have the density of distribution that others have" in the U.S., one Citi executive said.
Bank executives are expected to present details of the plan to Citi board next month. The moves will leave its U.S. banking operations concentrated in New York, Washington, Miami, Chicago, San Francisco and Los Angeles, where Citi has a substantial presence but ranks no higher than No. 3 in deposits. Citi could abandon or scale back where it is an also-ran, including Boston, Philadelphia and parts of Texas, said people with knowledge of the discussions.
The smaller-but-smarter approach is the latest attempt by Citi to mend a business dogged by underinvestment, strategic miscues and management turnover. The bank has 1,001 U.S. branches, compared with more than 5,000 apiece at Bank of America Corp., J.P. Morgan Chase & Co. and Wells Fargo & Co. Citi fell further last year, when Washington Mutual's failed banking operations were sold to J.P. Morgan and Wells Fargo bought Wachovia Corp.
"They're challenged," said Michael Beird, director of banking services at J.D. Power & Associates, a McGraw-Hill Cos. unit that ranked Citi in a customer-satisfaction survey earlier this year at or near the bottom in every U.S. region where it has branches.
The U.S. pullback will leave Citi even more dependent on corporate clients and its non-U.S. operations, both longtime strengths that could help rev up its overall growth. About 75% of Citigroup branches already are outside the U.S. Still, some Citi executives are nervous that scaling back in the U.S. could spark criticism in Washington, since the government owns a 34% stake.
Citi put its U.S. mortgage-lending and consumer-finance units on the block earlier this year, while reducing the size of its U.S. branch network by about 50 branches since early 2008. In her first year on the job, U.S. consumer-banking chief Terri Dial, one of the first major hires by Chief Executive Vikram Pandit, concentrated mainly on trying to streamline Citigroup's consumer businesses and make it easier for customers to navigate the bank's bureaucracy. Broader strategic questions were on the back burner until recently.
Some senior executives are frustrated with Ms. Dial's progress and have raised questions about her future, according to people familiar with the matter. Neither Citi nor Ms. Dial would publicly comment.
The retail-banking shake-up reflects Ms. Dial's new push to zero in on the most attractive customers -- and tailor financial products and services to their needs. Bank executives say that is a change in how employees peddle products. For example, Citigroup plans to put in many of its branches financial advisers who aren't shackled to Citi's brokerage joint venture with Morgan Stanley.
As it de-emphasizes traditional branches, executives hope to get credit-card customers to stash deposits with Citi through an intensified online-banking presence.
"We understand we have a great deal to do to improve the overall customer experience," Citi spokesman Michael Hanretta said. "We're on a very significant journey to make it simpler, more rewarding, and highly transparent to bank with us."
The six U.S. markets where Citi plans to concentrate its branch network have 18% of the nation's population. Executives likely will refurbish existing branches and launch market-specific ad campaigns, rather than open new branches or make acquisitions.
Citi is trying to sell its roughly 120 branches in Texas and reconsidering whether it makes sense to maintain a big presence in Boston and Philadelphia. In each of those areas, Citi holds less than 0.5% of total deposits despite building dozens of branches.
