Citigroup said it is expanding its services to small and mid-sized businesses globally, aiming to double its commercial banking revenue despite increasing competition for these clients.
Over the past two months, the U.S.-based financial institution has recruited a senior banker from Barclays to lead its initiatives with UK companies generating annual revenues between $10m and $3bn.
Additionally, Citigroup has launched its first specialized unit dedicated to serving smaller companies in Japan.
The bank has also acquired a stake in Numerated, a U.S. fintech company that leverages artificial intelligence to analyze and manage data for business loans. Citigroup plans to collaborate with Numerated to enhance its own loan data management through the use of advanced machine learning models.
According to Financial Times report, Citi generated just over $3bn in revenue from commercial banking clients last year, a small portion of its total revenue of nearly $80bn but said it believed it could double the business over time.
Japan is the sixth country in which it has launched dedicated commercial lending units over the past two years, following Canada, Switzerland, Germany, France and Ireland.
In all, Citi has named a half dozen new regional leaders in its commercial bank since it announced its wider restructuring effort nearly a year ago. Many of them are in Asia, where Citi sees servicing companies that have been below its radar in the past as crucial to expanding its business.
It also sees the push into commercial lending as proof that the simplified bank can be better at cross-selling following a reorganisation that cut thousands of jobs.
“We are able to provide to our midsized corporate clients the same payments services that we provide very large companies around the world,” said Tasnim Ghiawadwala, who leads Citi’s commercial bank division. “That’s incremental revenue for a bit of investment but not a huge amount of investment.”
The bank does not disclose the unit’s financial performance but said as recently as 2021 that its return on equity exceeded 30 per cent. That would make it one of the most profitable divisions in a bank that reported a company-wide return on equity of just over 7 per cent in the second quarter.
“Citi has a tremendous corporate franchise and a lot of the technical expertise to serve the commercial segment largely in place,” said a commercial banking analyst at industry research group Coalition Greenwich, Chris McDonnell,. “It’s a competitive strength that they can capitalise on.”
Going after smaller corporate borrowers is a departure for Citi. Except for a brief push to be everything to everyone in the early 2000s, it has long prided itself on serving only the biggest companies. Bank of America, JPMorgan Chase and Wells Fargo all have much bigger small-business lending groups.
But its pursuit of smaller clients comes as regional banks, squeezed by higher interest rates and losses in commercial property, have been hamstrung in how much they can lend. Business lending, like other aspects of banking, has also become more driven by technology than by personal relationships, playing to the strengths of large, well-resourced banks.
“Executives increasingly want to interact with their banks through their phones rather than having to put on suits and meet in a boardroom,” said McDonnell. “The definition of what is high touch has changed.”