- The Washington Times - Friday, September 25, 2009

NEW YORK | Citigroup Inc. appears to be shifting its strategy in its U.S. retail banking business, focusing on its strongest markets rather than trying to expand across the country.

Citi, one of the largest recipients of government aid, is concentrating its efforts on improving its operations and customer service in six major markets, a person familiar with the company’s plans said Thursday. The person requested anonymity because details of the plan have not been made public.

The targeted markets are where the company already has a strong foothold: New York, Washington, Miami, Chicago, San Francisco and Los Angeles.

A report in the Wall Street Journal on Thursday said Citi could “abandon or scale back” in areas where it has a smaller presence, such as Boston, Philadelphia and Texas. Citi is looking to sell its 120 branches in Texas, according to the Wall Street Journal.

“No decisions have been made about markets and branch locations,” the person said about whether Citi will leave or cut back in certain markets.

Citi, which wouldn’t confirm what the Associated Press or the Wall Street Journal reported, said it isn’t backing away from retail banking. In a statement, Citi said: “Customers, not products, are driving Citi’s strategy for North America consumer banking, and we understand we have a great deal to do to improve the overall customer experience. We’re on a very significant journey to make it simpler, more rewarding, and highly transparent to bank with us.”

A strategic shift would be aimed at boosting Citi’s profitability. The bank’s earnings have recovered this year after it lost $18.72 billion in 2008. However, its earnings so far in 2009 have come mainly on asset sales and low interest rates that enable banks to make fatter profits from the money they lend. And, like other banks, it faces rising loan losses for the forseeable future.

Jason O’Donnell, a senior research analyst at investment bank Boenning & Scattergood Inc., said Citi’s newest minority owner, the U.S. government, probably did not order the changes in retail banking strategy, although it now owns a 34 percent stake in Citi.

Citi has received $45 billion in government bailout money and guarantees to protect it against losses on more than $300 billion in risky investments. The government recently exchanged a majority of that bailout money for a stake in the New York-based bank.

Mr. O’Donnell said the Treasury Department would likely be consulted, or want to have some input, in bigger issues such as capital management plans. Government regulators would probably defer to management on issues such as retail banking strategies, he added.

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