Citigroup Sees Turnaround For US Retail Banking By 2014
08 February 2012 - 7:38AM
Dow Jones News
U.S. banks have been dogged in recent years by tougher
regulation and sluggish loan growth. But Citigroup Inc. (C)
believes things will turn around for its U.S. retail banking
operations.
By 2014, "people will really see a difference" in improved
customer service and product sales at Citibank branches, U.S.
retail and commercial banking chief Cecilia Stewart said in a
series of interviews last week. "We'll beat all our competitors in
productivity and client satisfaction," Stewart said, while revenue
growth will make retail banking, "I can definitely say, much more
profitable than pre-crisis," she said.
She has set forth goals for this year of "Double-digit loan
growth, high-single-digit deposit growth, [and] significant
improvement" in customer service.
Citi invested more than $1.5 billion last year in its worldwide
consumer-banking operations, a significant share of it in the U.S.
Stewart's efforts will show whether Citi can finally replicate its
retail banking success abroad, or whether revenue in its home
market will continue to suffer from run-down branches and
troublesome service.
Citi is the nation's third largest bank. But with $147 billion
in retail deposits and 1,016 branches, Citibank's U.S. retail
banking business is roughly the size of a regional bank like
Capital One Corp. (COF), which has 982 branches. Wells Fargo &
Co. (WFC) has 6,370 branches, the most in the U.S., according to
SNL Financial.
Citi serves 3.7 million households. Revenue from consumer
banking in North America fell 4%, to $5.1 billion, last year. Citi
doesn't break out revenue for Citibank's branch business anymore,
but Stewart said revenue in branch banking grew. In 2006, the year
before the crisis hit Citi, Citibank's branch banking business
generated revenue of $3.1 billion and a net income of $380
million.
"We feel really good about the momentum we have right now in
terms of revenue growth." Checking accounts are up, she said, and
deposits rose 2% last year, according to Citi's fourth quarter
earnings report.
Sanford C. Bernstein & Co. analyst Kevin St. Pierre wrote in
a research report in November that Citi did well in growing
deposits per branch over the last five years. Such "same-store
sales growth" was up 5.5% last year--compared to Bank of America's
1.5% and Capital One's 3.7%.
But consulting firm cg42 LLC, which surveyed thousands of bank
customers, found that 9.8% of Citibank customers are likely to
switch banks over 12 months, possibly taking as much as $33 billion
of deposits with them. "Customers rate them particularly badly in
areas of basic customer service," said Stephen Beck, cg42's
managing partner.
Stewart joined Citi in January last year, when she was lured
away from Morgan Stanley (MS) by global consumer banking chief
Manuel Medina-Mora. In 2010, Citi Chief Executive Vikram Pandit
handed control of the U.S. retail bank to Medina-Mora, whom he had
repeatedly praised for running Citi's large Mexican bank.
Medina-Mora set the strategy around "being relevant in the top
[metropolitan areas]," said Stewart. "We weren't renovating
branches, we kept changing strategies." In the branches, Citi had
"no consistent message," she said.
Citi started to invest--and made some progress. Better
technology and more focus improved cross selling. Since last year,
selling more products to existing customers can add hundreds of
dollars to a teller's pay, though compensation takes into
consideration whether customers put money into the new accounts or
use the credit card, so employees don't sell products customers
don't need, Stewart said.
Customer satisfaction is now measured monthly in every branch,
and "can take compensation up or down 20%. It's a real pop if you
do well," she said.
Last year, Citibank hired 150 bankers to cater to premium
customers and plans to hire about 60 more this year. Citi has 287
financial advisors in branches, and plans to hire up to 50
financial advisors this year.
The bank opened 19 branches this year, including a large,
flashy--and expensive--flagship branch at Union Square in New York.
Citi plans to open about as many branches this year as last year,
mainly in California and New York. Citi closed three branches last
year and expects to close five this year.
It already opened a flagship branch this month on New York's
42nd Street; San Francisco and Los Angeles will get one by the end
of this year. Older branches are being renovated.
Stewart conceded her to-do list remains long. "We are not where
we want to be" in customer service or holding on to customers. "We
have inconsistent performance," she said. "We had, and still have
some, very antiquated technology," and Citi doesn't sell as many
products to its customers "as our competitors do."
The Citibank of old was about "products that were wired and
piped" down the branches, Stewart said. Now it wants to be a
"client-centered organization. We are we are heading well down that
path."
-By Matthias Rieker, Dow Jones Newswires; 212-416-2471;
matthias.rieker@dowjones.com
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