Citibank, the 3rd largest bank after Bank of America® and JP Morgan Chase, announced Wednesday that in response to recent losses incurred by bad loans and toxic assets, it plans to reduce some of its operations, including limiting its branch network to only 6 major cities. The Bank plans on continuing operations in New York, Chicago, Washington, Miami, San Francisco and Los Angeles while reducing its presence in Boston, Philadelphia and Texas.
Aaron Julius Kim
The New Citi
In addition to these cutbacks, the bank will eliminate some of its consumer products, targeting a more affluent customer base with credit cards and larger “jumbo” mortgage loans, in an attempt to focus on higher returns. The bank also hopes to create a stronger online presence now that it has scaled back its traditional “brick and mortar” locations, attempting to compete with Bank of America® and Chase for new customers in that market. These changes will be addressed by the board in October.
The End of Brick and Mortar?
Citibank has always had a smaller physical presence than Bank of America®, Chase and Wells Fargo, but until recently was the largest of the “superbanks” by assets. In the last few years, however, Citi has fallen behind after the acquisition of Washington Mutual by JP Morgan and Wachovia by Wells Fargo. While getting rid of banking locations may seem like a counterintuitive growth strategy, internet banking is a burgeoning consumer market, with 25% of the population prefer to do their banking online, and the number of users is predicted to grow by 20% annually. (ABA Survey) For banks that are having a hard time keeping up with competitors through traditional banking channels, this might be the right to time try and get into the online banking game.