Citigroup quietly scales back in consumer banking

Tue Jan 13, 2015 7:30am EST
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By David Henry

NEW YORK (Reuters) - Citigroup Inc has been quietly scaling back its consumer banking presence in some of the world's major cities, pulling out from markets where it does not have enough branches to be competitive.

In 2014 Citi retail executives went from targeting 120 of "the world's top 150 cities" to homing in on 100 cities where the company has the greatest scale and potential. As a result, it is withdrawing from Tokyo, Lima, Panama City, and Houston, for example. In the United States, it is now focused on six cities, down from 14.

And while the bank has no specific plans to cut more branches in the near term, it will continue to re-evaluate its holdings, Jonathan Larsen, who oversees Citigroup’s overseas retail branch business, told Reuters in an interview.

"We have to make sure that we are not subsidizing marginal operations for long periods," Larsen said. The bank's strategy will work with fewer cities, he added.

Cutting back in consumer banking will eat into the group's earnings, at least in the near term. The bank is expected to book some $800 million of restructuring charges in the fourth quarter when it posts results on Thursday.

Chief Executive Michael Corbat has announced $2.4 billion of additional restructuring costs in the last two years. The bank hopes the spending will eventually save it some $3.4 billion annually.

The charge, in addition to an expected $2.7 billion charge for litigation, largely involving other businesses, is expected to all but wipe out Citigroup’s profits for the fourth quarter. Analysts, on average, expect Citi to earn about 10 cents a share, down from 77 cents a year earlier, according to Thomson Reuters surveys.

The shift underscores Citigroup’s challenge: how to shrink in locations where it lacks critical mass and yet prevent its global network from becoming less valuable to customers while it focuses on fewer cities.   Continued...

The Citibank logo is pictured at its Nicaragua headquarters in Managua October 16, 2014. REUTERS/Oswaldo Rivas