During the 1980s, Citicorp marched into such states as California, Florida, Arizona, and Illinois, dropping hundreds of millions of dollars to buy failed banks and thrifts. The nation's biggest bank company planned to blanket the nation with retail branches and bring "Citibanking" to consumers everywhere.

But then problem real estate loans began to mount, pulling Citicorp's earnings, stock price, and capital down to appallingly low levels. Stripped of the means to expand, the New York-based Goliath pulled back.

Getting Lean

Now Citicorp is selling its Arizona network of 59 branches to Minnesota-based Norwest Corp. and unloading 17 branches in Northern California to two in-state companies. When the California sale is complete, Citicorp will have 97 branches in a state in which it once envisioned owning 550.

"Five years ago there was an emphasis on tonnage," said a former executive of Citicorp's Illinois unit. "That is not the strategy today."

Citicorp executives declined to be interviewed for this story. But competitors and former employees say that outside New York, the banking giant has narrowed its retail ambitions and reined in its regional executives. Its new plan: Centralize operations and focus locally on the upscale market.

Aiming High

But it hasn't given up on the bells and whistles to attract its target audience.

In Florida -- where its 45 branches are dwarfed by southeastern giants such as Barnett Banks, Nationsbank Corp., and First Union Corp. -- Citicorp has deployed what other bankers say are the most advanced automated teller machines in the state. The ATMs employ touch-screen technology and conduct business in several languages.

In Chicago -- the one market outside New York where Citi has gained significant share -- the company is aggressively recruiting bankers with strong ties to the city's doctors, lawyers, and other high-income professionals, according to an executive at a rival bank.

To weed out the hoi polloi that it once courted, Citibank in Chicago and elsewhere has raised its minimum balance requirements. It also is pushing "Citigold," a relationship banking account for affluent individuals.

"People say they are disinvesting, but we don't see that in Chicago," said a banker. "They are remodeling, repositioning, and upgrading their branches."

Targeting the upscale is a far cry from Citicorp's earlier plans to be a big retail player in every major metropolitan market. It could also be difficult, considering the path Citi took to enter far-flung markets -- buying failed thrifts. These institutions typically served a much lower-scale customer than Citi is now trying to attract.

Still Strong

Despite the problems, few people are ready to label Citibank's domestic expansion efforts a failure. Through its massive Visa and MasterCard credit card business, Citicorp still boasts a relationship with one of every four U.S. households. And while it is pulling out of some markets, it is pouring significant resources into others.

"Don't be lulled by what seems to be an anemic presence," warned Stephen D. Taylor, the chairman of American Savings and Loan in Miami and former head of Citicorp's Florida banks.

"Citi knows a lot more about California and Florida today that it did 10 years ago. They will keep the engine running, cut out costs, centralize marketing, and use that as a base on which to build."

Successful Consolidation

There is already some evidence to support Mr. Taylor's scenario.

In 1990, the banking company began consolidating its consumer back-office operations, including those in California, Florida, Illinois, Maryland-Washington, and Nevada. Earlier this year, it centralized the management of its regional outposts.

The back-office consolidation has already produced a 30% work force reduction in the regions, to 5,400 people, since year-end 1990, a 31% decline in unit costs, and a 36% decline in operating expenses, to $515 million, according to Diane Glossman, an analyst at Salomon Brothers Inc.

"By the beginning of 1994, the cost dynamics of Citicorp's U.S. consumer business will have been changed dramatically, with the added benefit of enhanced service quality," Ms. Glossman wrote in a recent research report.

Will It Work?

But there are still questions about the new management strategy.

Under the recent reorganization, Citicorp's California, Florida, Illinois, and Maryland-Washington units are now run from Chicago. They are overseen by Steven Price, a company veteran who worked with global consumer banking czar Pei-Yuan Chia in Southeast Asia.

Previously, the regional operations had their own chief executives who maintained considerable power.

"When you look at the economies, it [centralization] makes sense," said Frank Bonetto, the former director of Citicorp's California banks. "But I can't fathom how they could be as responsive to the local marketplace being run by people who never operated in this state and don't have a clue."

But Mr. Taylor, the former Florida Citibank executive, disagrees.

"I applaud what they are doing," he said. "Centralization is what Citi does best."

He pointed out that James Bailey, the company's U.S. consumer banking chief and Mr. Price's boss, oversaw the centralization of Citicorp's credit card business -- one of the banking company's biggest success stories.

Mr. Bonetto, who left Citicorp in 1989, is now in charge of community banking at Bank of the West. As such, he is benefiting from Citi's retrenchment -- Bank of the West is buying 15 Northern California branches from the New York bank.

Citi also is selling two Golden State offices to Bay View Federal Bank, leaving it with just 60 branches in the San Francisco area.

According to Mr. Bonetto, an institution needs at least 175 branches to have a "real presence" in that hotly competitive market.

"They are either going to have to acquire some more, or divest what they have," he said.

Growth by Concentration

So far, it looks as if Citicorp is opting for centralized growth. Susan Weeks, a company spokeswoman, said Citibank plans to apply proceeds from the sale of 17 branches in the Sacramento area to its San Francisco branches.

"By shedding stand-alone branches, we can take the resources and redeploy that in the San Francisco and Greater Bay areas," she said. "We'll have more resources and more capital to put up more branches and more ATMs."

Asked about targeting upscale customers, Ms. Weeks said: "We're happy to have anyone bank with us."

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