The battle for retail banking customers is intensifying in New England.

This week Citizens Financial Group in Providence, R.I., unveiled plans to open 22 full-service branches in Star Markets stores in eastern Massachusetts.

Citizens now has 28 supermarket branches in New England, 10 of them in Massachusetts.

BankBoston Corp. and Fleet Financial Group, both based in Boston, dominate the eastern Massachusetts retail banking market.

BankBoston, which acquired BayBanks Inc. and its supermarket outlets in 1996, runs 42 supermarket branches in Massachusetts alone. It recently announced a retail strategy that takes aim at competitors in its home state. Fleet has 251 traditional branches in Massachusetts but only one supermarket branch in the state.

Citizens, owned by Royal Bank of Scotland and Bank of Ireland, has been rapidly expanding its presence in central and western Massachusetts through a series of bank acquisitions over the last few years. The agreement with Star Markets will introduce Citizens to new towns on the eastern coast and Cape Cod.

The 22 new branches will also advance Citizens' strategy to attract middle-market retail customers, said Hal Tovin, executive vice president and director of marketing and alternative delivery services at the $16 billion-asset bank.

"The branches not only extend our franchise in areas where we have a void, but they offer customers greater convenience," said Mr. Tovin.

In-store branches can be more cost-effective than acquisitions in entering a new market, said consultants and analysts.

"They allow banks to extend their distribution in markets they have just entered or are considering entering," said Les Dinkin, managing principal at NBW Consulting Group in Westport, Conn.

Mr. Dinkin estimated that supermarket branches cost 20% to 50% less to open and operate than traditional, stand-alone branches.

Each of Citizens' Star Markets branches will be staffed with six or seven employees, licensed to sell investment products and equipped to sell loans and deposit products.

Citizens has operated pilot branches in supermarkets for two years, Mr. Tovin said.

The supermarket branches provide an additional opportunity to advertise and promote Citizens' services, Mr. Tovin said. Sixty percent of the business conducted in these branches has been with new customers, he noted.

"It's not a hard sell, and it's not a quick sell," he said. "But our message is getting delivered in the aisles."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.