Why Citi, Citizens are betting on their existing branches

• Key insight: Unlike many of their large and midsize peers, Citi and Citizens Financial Group are pursuing retail banking strategies that focus on their existing branch footprints.
  
• What's at stake: Both banks are betting that investments in their branches will pay off in the form of deeper client relationships, higher profitability and, ultimately, improved returns.
  
• Expert quote: "We are where we want to be." — Kate Luft, Citi's head of U.S. retail banking and Citigold
  

Some large and regional banks are opening retail branches in new markets or buying other banks as a way to reel in more deposits, increase their scale and grow their market share.
Others are taking a different approach, leaning into their existing branch footprints and seeking opportunities to derive more business from undertapped customers and communities.

Citigroup and Citizens Financial Group are part of the latter group. While some of their competitors are engaged in branch build-outs and acquisitions, Citi and Citizens are focused on what's already theirs, and figuring out how to better leverage it to increase profitability and margins. The approaches show there's not a one-size-fits-all strategy in the competitive retail banking market.

New York-based Citi plans to renovate a significant portion of its 650 U.S. branches between now and 2028, making the offices more advisory in nature, executives announced last week at the bank's investor day.

Similarly, Citizens is fine-tuning its 14-state branch footprint, looking for opportunities to add branches in high-growth-potential areas while closing or relocating other sites. Neither bank expects the changes to have much of an impact on the overall net total branches they operate.

"Our biggest opportunity is not by acquiring a ton of new clients," Kate Luft, whose responsibilities at Citi include leading U.S. retail banking, told American Banker. In terms of markets and branch count, "we are where we want to be. We actually think we're in a sweet spot because we're really focused more on the deepening of relationships and making sure we have the right coverage and scale."

Matt Boss, who's been head of consumer banking at Citizens for the past year, expressed a similar viewpoint, telling American Banker that there's "still a lot of running room" in the bank's core retail markets, which include the Northeast, Ohio and Michigan.

As the Rhode Island-based regional bank looks to increase its branch count in the New York metropolitan market over the next several years, it will also review its footprint in other parts of the country, and possibly consolidate or relocate offices, including some in-store branches, Boss said.

Citizens will roll out more details about its branch strategy by the middle of the year, he said.

The more common approach

The plans shared by Citi and Citizens stand apart from several of their peers. JPMorganChase, which has the largest branch network in the nation with more than 5,000 locations, continues to open new branches across the country. In a press release Thursday, it said it would open 18 branches in 11 states this month, bringing the number of new Chase offices this year to 52.

To be sure, JPMorgan is also closing branches in certain markets. But it has recorded a net increase in branches every year since 2023, according to the Federal Deposit Insurance Corp.

Other banks are also investing in new geographies. Bank of America in Charlotte, North Carolina, has set its sights on markets such as Louisville, Kentucky, and Boise, Idaho. Pittsburgh-based PNC Financial Services Group expanded its branch footprint in January when it acquired FirstBank Holding Co. in Colorado, a deal that expanded its presence in that state and Arizona.

PNC is also growing its branch presence through direct investment. The bank is spending $2 billion to add 300 branches by 2030 in markets such as Chicago, Florida and North Carolina.

Charlotte-based Truist Financial announced last summer that it plans to open 100 branches and renovate 300 existing offices in high-growth markets, mostly in the Southeast where it is a dominant player, but also in markets where its presence is smaller, such as Pennsylvania.

Like PNC, Fifth Third Bancorp in Cincinnati recently completed an acquisition as part of its efforts to pursue branch expansion outside of its core market. The bank acquired Dallas-based Comerica in February, while continuing to focus on expanding its branch network in fast-growing Southeast regions.

In December, Fifth Third said it would add 150 locations in Texas by 2029. By 2030, it expects more than half of its retail footprint to be concentrated in the Southeast, Texas and Arizona.

Regions Financial in Birmingham, Alabama, is taking a mixed approach. While it's not planning to make an acquisition, and it isn't interested in expanding outside of its current footprint, it does intend to open 135 to 150 new branches in places like Atlanta, Miami and Nashville, while closing about the same number of offices in markets with lower population.

Why Citi, Citizens are thinking differently

Citi, one of the largest banks in the world, is an outlier. It has the smallest branch network of the big four U.S. banks. Its branches are concentrated in six wealthy urban markets, including New York and Miami. Its executives continue to defend the size of the footprint as analysts and other observers try to understand how the bank will ramp up earnings in its retail segment.

Citi has laid out a plan. In November, it split up retail banking and consumer credit cards, which had been operating under one umbrella, and moved retail banking into its wealth business.

Luft, who was already running the retail business, also took over leadership of Citigold, a relationship tier for affluent customers. The shift was designed to better integrate the retail bank into wealth in order to provide a full wealth continuum and a more seamless retail-to-wealth experience for clients.

The opportunity with Citi's existing retail banking and Citigold client base is big — those clients have about $3 trillion of potential revenue and asset generation that's not currently serviced by the retail bank or Citigold, Luft said. Such a large amount of money means that Citi doesn't necessarily need to enter new geographies or add substantially more branches, Luft said.

Instead, it will refresh its branches and hire more than 400 personal bankers and client advisors to improve service to clients. It's also planning to hire more than 200 small-business advisors and implement more artificial intelligence tools to create an omnichannel client experience.

Firmwide, Citi said it will make $5 billion of incremental investments between now and 2028, a portion of which will go toward branch renovations.

"The organic opportunity is so apparent," Luft said.

Citizens, meanwhile, has more than 950 branches, or roughly 300 more than Citi. It has focused on increasing brand awareness in metro New York, following back-to-back acquisitions in 2022 that gave it a bigger presence in the region.

It currently has about 170 branches in that market, but it would like to increase that number, Boss said. At the same time, it may start to shrink the number of in-store branches it operates.

In markets such as Boston, Philadelphia and Buffalo, New York, in-store branches "have played an important role in building distribution and … have served the company incredibly well," Boss said. "As we think through the future, though, it does mean we may need to think about traditional locations in those places" as a way to "truly be competitive."

Like Citi, Citizens wants to lead more of its retail customers, which tend to skew mass-affluent, toward its wealth offerings, Boss said.

"We don't do as good a job as we could in terms of capturing those customers' full relationship," he said.