By Telis Demos
In the lean years following the financial crisis, Citigroup Inc.
made an unintentional bet on the future of banking. It's starting
to pay off.
While Bank of America Corp. and JPMorgan Chase & Co. were
gobbling up cheap deposits at their thousands of branches around
the U.S., Citigroup was shrinking its footprint, focusing on a
handful of big cities to right itself after its near-collapse.
Now the bank's executives are convinced that many U.S. consumers
are finally ready to leave the branch behind and fully embrace
digital banking. Citigroup added roughly $1 billion in digital
deposits in the first quarter, more than all of last year. About
two-thirds of that total came from new customers, and a little more
than half don't live near any of the bank's roughly 700
branches.
In recent months the bank has reorganized its consumer unit,
knocking down walls between banking and cards. It rolled out a new
account through its mobile app aimed at credit-card customers. And
it is targeting potential customers with mobile-banking offers tied
to the rewards they get for cards.
"For the 21st century, we are glad we never got the ballast of
an extra 4,000 branches," said Stephen Bird, the bank's CEO of
global consumer banking. "I'm certain it's going to turn out to be
a very fortuitous thing."
Other big banks are ramping up their digital offerings too, but
they are doing it alongside their giant branch networks. Citigroup
is wagering that many of those locations -- more than 4,000 each
for JPMorgan and Bank of America -- will become burdensome.
Still, it has a lot of ground to cover to reach its rivals.
JPMorgan and Bank of America last year far exceeded Citigroup's
return on equity, a key measure of bank profitability, in consumer
banking. Banks have had some success attracting savers with
high-yield online accounts but still find it difficult to establish
traditional banking relationships with customers who don't have
access to branches.
A mid-2018 survey by the consulting firm Accenture found that
84% of U.S. banking customers still visit branches at least once a
year, though less than half of people cut go weekly or monthly.
Meanwhile, some 44% of customers said they never use their bank's
mobile application.
Citigroup's outposts in New York, San Francisco and other major
cities are among the largest and most profitable bank branches in
the U.S., but that hasn't translated into broad deposit growth. Its
U.S. consumer deposits are flat since the end of 2015, compared
with double-digit gains at Bank of America, JPMorgan and Wells
Fargo & Co.
Citigroup's status in retail banking reflects its history. The
company was created in 1998 through the merger of Citicorp, a
global bank with a strong urban presence, and the insurance company
Travelers. JPMorgan and Bank of America, by contrast, built up
their retail networks through a flurry of regional -bank deals.
In 2008, Citigroup tried and failed to buy Wachovia, and even
considered a bid for Washington Mutual. Those deals would have more
than doubled its U.S. branch count. It was beat out by Wells Fargo
and JPMorgan, respectively.
A massive government bailout saved Citigroup from collapse
during the financial crisis, but the bank was in no position to
grow for several years. Around 2010, it started opening new
branches in its core cities and debated expanding even more,
according to people familiar with the matter. But cost cuts won the
day, and the bank continued to pare its U.S. retail network.
Yet, unlike its peers, Citigroup had a strong overseas retail
network. As it was slimming down in the U.S., it was growing in
places including Hong Kong and Singapore, providing a variety of
digital banking and card services as well as partnering with social
media platforms such as WeChat.
For the past several years, Citigroup has been importing lessons
learned from Asian consumers to its U.S. retail business, which is
now focused on six major cities: Chicago, Los Angeles, Miami, New
York, San Francisco and Washington, D.C.
Mr. Bird, Citigroup's head of consumer banking, was previously
the bank's Asia-Pacific chief. Last year, the bank shifted its
Asian regional consumer banking head, Anand Selva, to the U.S. Mr.
Selva, who joined Citigroup in India in 1991, had never lived in
the U.S. before the move.
Citigroup's revamped U.S. retail strategy hinges on wringing
more business out of its 28 million credit-card customers,
two-thirds of whom don't live in a branch market.
The idea of cross-selling banking services to card customers
isn't new. But until last year, U.S. cards and U.S. retail banking
at Citigroup were housed in separate units with different customer
strategies and leadership teams.
Last year, Citigroup changed that structure. The longtime global
cards head, Jud Linville, retired, paving the way for Mr. Selva to
take control of both retail banking and cards in the U.S.
This year, Citigroup began targeting credit-card holders outside
its branch markets with bundle offers for banking services. For
example, a customer with a 2% cash-back card might be targeted with
an offer of raising that to 2.5% if he or she also opens a bank
account.
It launched high-yield savings accounts, known as Citi
Accelerate, for places beyond its branch network. The Dallas-Fort
Worth region, for example, is home to card partner American
Airlines Group Inc. and many card customers.
Citigroup's mobile app pre-populates much of the new-account
application with what the bank already knows about the customer. In
the first quarter, Citigroup said that its active mobile U.S.
consumers jumped 12% from a year earlier, to 11 million.
The bank also moved unsecured personal lending into its card
unit, reducing internal competition for borrowers. Mr. Selva is
also bringing more products from Asia, such as Flex Loan, which can
convert card credit lines into fixed-interest loans without a new
credit check. A new tool, Flex Pay, allows customers to pay off
individual purchases in installments.
Write to Telis Demos at telis.demos@wsj.com
(END) Dow Jones Newswires
May 12, 2019 08:14 ET (12:14 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
JP Morgan Chase (NYSE:JPM)
Historical Stock Chart
From Aug 2024 to Sep 2024
JP Morgan Chase (NYSE:JPM)
Historical Stock Chart
From Sep 2023 to Sep 2024