Felix Salmon

Citi’s US branch network: Doomed to mediocrity

By Felix Salmon
January 11, 2010

The departure of Terri Dial from Citibank only serves to underline how dysfunctional Citigroup remains, long after Vikram Pandit was meant to have created small-enough-to-manage Citicorp within the larger behemoth. Tellingly, Dial is being replaced by Manuel Medina-Mora, a manager who has succeeded within Citigroup largely by having enough power from day one to do what he wanted, rather than having to navigate Citi’s labyrinthine bureaucracy. Medina-Mora, for instance, flat-out refused to rebrand Banamex as Citibank, and so Banamex it remains to this day.

Aaron Elstein quotes Dick Bove as saying that Dial was “severely constrained in what she could do”; Bove thinks that Dial left “in total frustration” rather than being pushed. My feeling is that either way she failed to deliver results, and that she was beginning to be more trouble for the bank’s top management than she was worth.

Citi’s branch network in the US is not huge — Wells Fargo and Bank of America both have six times as many branches as Citi does — but it’s symbolically very important, as the public face of the troubled bank. The problem is that making significant changes across 1,000 different branches is an extremely expensive proposition, without any guarantee of success.

The real problem for Citi here, of course, is that it lost Wachovia to Wells Fargo. Pandit had it all worked out: Citi’s US consumer bank would get folded into Wachovia, and run out of Charlotte, by people who had a proven ability to run a US branch network extremely efficiently. (It wasn’t Wachovia’s branches which caused its downfall.) When Wells swooped in at the last minute to snatch Wachovia out of Citi’s grasp, the California bank probably saved Citi untold billions in extra losses. But it also destroyed Pandit’s last real hope for being able to build a top-tier retail franchise in the US. Terri Dial couldn’t change that fact, and I doubt that Medina-Mora will be able to do so either.

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