Citi wants to renew its focus on U.S. companies with less than $20 million in annual sales. To court them, the bank will hire about 200 bankers by the end of 2011
Citigroup (C) Chief Executive Officer Vikram Pandit, who for the past two years has championed the U.S. bank's "globality," may be getting a new mantra: locality. Citigroup claims 2,500 of the world's 3,000 largest corporations as clients. These days, though, it is keen on targeting U.S. companies with less than $20 million in annual sales and plans to hire about 200 bankers by the end of 2011 to court them. That would bring the number of small business bankers to about 500, or one for every two North American branches. "It's a renewed focus for us," says Raj Seshadri, 45, head of small business banking. "We feel we can help business owners and the economic recovery, and there's money to be made for our shareholders." Citigroup employed about 258,000 people as of Sept. 30.
Expanding the bank's focus to include doctors, restaurants, and cabinet makers alongside Coca-Cola (KO) and wealthy individuals won't be easy, says Randy Dennis, president of Little Rock (Ark.)-based DD&F Consulting Group, which advises banks with less than $15 billion of assets on risk management and business strategies. "It's totally different, and it requires a great deal of monitoring," he says.
The four largest U.S. banks by assets—Bank of America (BAC), JPMorgan Chase (JPM), Citigroup, and Wells Fargo (WFC)—have been criticized by some entrepreneurs for tightening credit to small businesses after taking a combined $140 billion of federal bailout money. A record 41 percent of small business owners say they can't get adequate financing, an increase from 22 percent two years ago, according to a July report from the National Small Business Assn.
Banks with less than $10 billion in assets make 56 percent of the country's small business loans, according to the Independent Community Bankers of America. Larger banks are now trying to muscle in as losses stay high on home loans and commercial mortgages, and new regulations limit fees and interest rates on credit and debit cards.
Bank of America plans to hire 1,000 employees in the next year to cater to companies with sales of $3 million or less, CEO Brian T. Moynihan said last month. Wells Fargo says it's the nation's biggest lender to small companies. Since last November, JPMorgan Chase has hired more than 500 business bankers.
This year through Sept. 30, Citigroup's Citibank unit has made about $4.5 billion of new small business loans in the U.S., about the same amount as it made for all of 2009, Seshadri says. She notes that Citigroup's 1,000 North American branches, concentrated in the northeastern U.S., Florida, Texas, Illinois, and California, are in dense urban areas with the largest number of small businesses. "Geographically they've got it," says DD&F's Dennis. "If they can hire the right people, it could be a home run."
The bottom line: Facing losses on mortgages and restrictions on fees, Citigroup is expanding in small business lending.