In keeping with its restructuring moves, Citigroup Inc. C is set to remodel its U.S. branches with greater focus on technology while simultaneously reducing the number of branch locations. As per a Bloomberg report, the bank will shut down six retail branches in Boston and another 11 in the adjacent area in January. The bank is focused on expansion in major urban markets with increased investments and banking through digital channels nationally.
Notably, each Boston branch has average deposits of $54 million as compared with $155 million in other key markets. Citigroup has shed a number of its U.S. locations to cover major cities including New York, Chicago, Los Angeles, Miami, San Francisco and Washington. However, Citigroup will continue to service municipalities, companies and high-net-worth clients in Boston.
Focusing on technology, customers can enjoy better banking experience. Touchscreen walls and online terminals would enable customers to scan through products. The better equipped technologies will also assist customers in smoothly availing banking services. The digitization of branches needs more resources, which are not available at Boston retail branches and therefore the move is to close down such branches.
Moreover, branches are trending to be less important for banks as customers prefer to connect with banks though the Internet and mobile phones. Such modes of communication not only save time for a customer, avoiding physical visit to a branch, but also saves costs for a bank.
Processing a daily transaction becomes less expensive for banks compared with processing in a big set up with more staff. However, while ATMs and Internet facilitates normal transactions including cash withdrawal and check depositing, banks prefer customers to visit branches for important transactions like availing loans.
Last year, Citigroup agreed to vend 41 retail branches in Texas to BB&T Corporation BBT. This was in addition to the deal to divest 21 branches to BB&T in December 2013, which was completed in June 2014. Some branches were also shut in Philadelphia.
Citigroup is not the only bank to emphasize on the importance of reducing branches with the services being more electronically inclined. Other banking giants including JPMorgan Chase & Co. JPM and Bank of America Corp. BAC have tested similar moves.
As Citigroup continues to face issues on various fronts including several ongoing legal investigations, we remain encouraged by the company’s streamlining initiatives that will reduce expenses and drive operational efficiencies. Citigroup currently carries a Zacks Rank #3 (Hold).
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