The Economist February 19th 2022 Finance & economics 67Globalretailbanking
The Citi that was never finished
T
he “dilly-dallying”, to use the term
put forward by Jane Fraser soon after
taking over Citigroup in early 2021, is al
most over. Outside America and a few in
ternational centres, the distinctive blue
branches that were once common features
of big cities around the world will soon be
vestiges of another era, much like black,
yellow and red Kodak signs. The New York
based bank, which built a reputation over
decades as a global consumer giant, is in
retreat. From now on it will focus primarily
on commercial banking and wealth man
agement, serving large and mediumsized
businesses and millionaires. The retail
branches it retains will mostly be concen
trated in a few domestic markets, such as
New York and California.
A series of announcements have alrea
dy been made: in August the sale of the
Australian retail operations to National
Australia Bank; in October the winddown
of those in South Korea; in December the
sale of its Philippine business to Union
Bank of the Philippines; in January a dispo
sal of Indonesian, Malaysian, Thai and
Vietnamese branches to Singapore’s Unit
ed Overseas Bank (uob), whose chief exec
utive, Wee Ee Cheong, remarked that in a
single deal his institution had added what
it had taken “even Citi” half a century to
build; and, also in January, the sale of Citi’s
consumer business in Taiwan to dbs, an
other Singaporean bank.
The remaining announcements are ex
pected to come soon. One of the most im
portant will be about India, where Citi has
long had an outsized influence; Axis Bank,
India’s thirdlargest privatesector lender,
is rumoured to be close to picking up the
business for around $2.5bn. Operations in
China, Russia, Poland and Bahrain are still
in play. Added to the disposal list recently
has been the wholly owned Banamex, Mex
ico’s thirdlargest bank. Delay would only
erode whatever value remains in these op
erations as employees and customers look
for a stable home.
Citi’s retreat is not unique. hsbc, which
came closest to having Citilike global am
bitions in retail banking, has pared back—
though not as dramatically, at least in part
because its core market, Hong Kong, is
much smaller than Citi’s. Australia’s anz
gave up on a panAsia strategy six years
ago. Like Citi, these banks have kept offices
around the world for corporate business,
from lending to treasury services.
As a result, it is tempting to view Citi’s
retreat as just another failed attempt at
world domination in consumer banking.
But it differs from past failures in two re
spects: the sheer ambition behind the ini
tial expansion, and the legacy it leaves in
retailbanking markets around the world. Important to Reed
The expansion was premised on rethink
ing global finance, with a vast network
serving everyone, everywhere, in every
way. As with many ambitious plans, Citi’s
global push was in response to problems at
home. In the 1970s, regulatory restraints
resulted in a retailbranch network that
was limited to New York City, unprofitable
and unable to provide the funds Citi want
ed for its lending business. While on holi
day, John Reed, a senior executive, wrote a
sevenpage “memo from the beach” argu
ing that one option would be for Citi to
dump retail banking altogether, a path lat
er taken by Bankers Trust (now part of
Deutsche Bank), Bank of New York and
Boston’s State Street, among other institu
tions. The other option was to go very big.
Mr Reed posited that rather than think
ing about retail banking as deposits and
loans, Citi should answer the expansive fi
nancial needs of families, whatever they
may be. Through “success transfer”, as thebank dubbed it, solutions developed in one
market could be rolled out in others, creat
ing economies of scale where they would
not exist in a selfcontained local institu
tion. The bank came up with a clever slo
gan to fit: “Citi Never Sleeps”.
Years of heavy losses were incurred to
create a new form of retail banking, com
ponents of which are now so familiar that
it is hard to imagine they once didn’t exist.
These included atms (Citi was the first big
American bank to introduce customer
friendly machines at scale), credit cards (of
which it went on to become the world’s
largest issuer) and electronic payments
(which it was one to the first to offer to re
tail customers).
Citi’s reputation as a driving force in fi
nancial technology stretched into the
1990s, when more than a million custom
ers received floppy disks biannually with
software updates, enabling protointernet
banking. Aware of the identification chal
lenge that existed in a transition from hu
man contact in branches, the bank experi
mented with the retinascanning technol
ogy that, along with facial recognition, is
only now becoming common.
These innovations helped drive inter
national expansion. Mr Reed became the
bank’s chief executive in 1984 and an ever
wider array of markets were opened, ex
tending from Nigeria and Sweden to (via a
Hong Kong acquisition) Thailand, as well
as particularly swanky efforts in London
and Geneva. The bank opened a represen
tative office in Beijing, too. Augmenting
the branches were call, processing and in
novation centres in numerous places, in
cluding Silicon Valley, the Philippines and
perhaps most importantly India, where
they played a critical role in germinating
the country’s vibrant technologyout
sourcing industry.
The bank’s drive was a magnet for
bright people. Alumni included a former
prime minister and the current finance
minister of Pakistan, a former central
bank governor of the Philippines and the
future leaders of innumerable financial in
stitutions, including the largest private
sector bank in India in terms of assets,
hdfcBank—whose market capitalisation
alone is more than 90% of Citi’s—and dbs,
whose present chief executive came to the
bank after being a star at Citi.
In many ways this reflected Citi’s suc
cess but it also illustrated its vulnerability.
“Success transfer” ultimately meant creat
ing capable competitors. Local regulators
created their own obstacles, limiting the
rights of foreign banks to open branches or
link international accounts, thereby un
dermining economies of scale. Techno
logical innovation dimmed after Mr Reed’s
departure in 2000. Rivals, including those
run by former Citibankers, copied Citi’s in
novations, sometimes improving on themN EW YORK
Citigroup’s disposal of its international retail network marks the end of a
remarkable experiment in finance
Fashions change in banking, too