New technologies, wealthy customers: What to know about Citi’s investor day
- Citi's goal is to acquire, engage and service clients "entirely digitally,” said Stephen Bird, CEO of the global consumer bank
- “We expect the combination of robotics, cloud and migration to mobile to be worth well over $1 billion in expense saves by 2020,” said CFO John Gerspach
Citi just hosted its first Investor Day since the 2008 crisis, where it presented its goals for revenue and return between now and 2020 and how its retail banking business, integration of emerging technologies and continuing branch transformation will get the bank where it needs to go. Here’s what you need to know.
- 10 percent projected return on tangible common equity by 2020
- 72 million U.S. clients; 16 million in Asia, 21 million in Mexico
- 25 percent decrease in global real estate footprint since 2013, with plans to reduce another 25 percent by 2020
- 16 percent decrease in branches over the last three years; $400 million in savings
- 12 percent decrease in headcount; $800 million savings
- 50 percent expansion of ATMs in all markets since last year
- 19 markets where Citi operates its consumer business, compared to 40 in 2013
- 40 percent increase in mobile users since last year
- 15 percent increase in digital customer acquisitions since last year
Affluent, client-led growth
Citi is relying heavily on the retail banking and wealth management business to help carry its push for savings and earnings improvement. In November, its FinTech unit launched its first product, a mobile-first banking experience for its Citigold clients (those with balances of at least $200,000) that combines basic banking, investing and money movement.
Citigold clients represent 60 percent of the bank’s total loans, deposits and assets under management, said Stephen Bird, CEO of global consumer banking, and generate 25 times more revenue per client than the mass market segment (those with less than $50,000 in balances). Citi Priority, whose clients maintain at least $50,000 in balances, is important in its own right, Bird added, “but also is a feeder tool into Citigold.”
“Our relationship banking model serves our clients across the full spectrum of their needs as they borrow, pay, save, invest and protect,” Bird said. “Citi is not a monoliner. Once you become a Citi customer you can stay a Citi customer as your needs evolve through your life stages and you move up through the wealth continuum. That’s the Citi model.”
New technologies for better efficiency and experience
The bank is deploying machine learning and big data platforms, with more than 160 live user cases in the market currently, though it expects that number to exceed 200 by the end of the year. (That’s relative to the 1,000 employees devoted to running those processes — and these are the earliest stages of firmware adoption of these technologies, according to CFO John Gerspach.)
For example, new models help Citi understand each customer’s wallet; things like how many cards they have, what types of cards they have, which ones they use most often and which carry the largest balances. With those insights, the bank can target certain customers with certain offers: if someone has a competitor’s cash-back card, Citi can offer him its Double Cash card, if she tends to carry balances, it can offer her the Citi Simplicity card.
Bird said these tools have also driven “massive improvement” in response rates and efficiency, noting that its “ability to retain spending activity is five times higher using this data and our ability to retain balances is three and a half times.” Gerspach said adopting these technologies has allowed Citi to move more than 1,200 legacy servers and that it expects to eliminate more than 80,000 physical desktops by 2020 as it migrates to a more mobile work environment.
“We expect the combination of robotics, cloud and migration to mobile to be worth well over $1 billion in expense saves by 2020,” Gerspach said.
Citi has been one of the most aggressive of the major banks when it comes to branch closures and upgrades.
“Branches will continue to be relevant in the future but they will be for advice and wealth management. They will be fewer, smaller and in higher impact locations where they can punch above their weight,” Bird said.
Bird reported the bank reduced its number of branches by 16 percent in the past three years and that downsizing the remaining branches has saved it $400 million. It’s also expanding the number of ATMs in all markets, having grown the network by 50 percent since last year.
“Our goal is to acquire, engage and service our clients entirely digitally,” Bird said.
With the launch of the mobile app for Citigold clients, the bank increased the number of digital features in the app by 85 percent over the last year to allow for 1.8 billion customer touch points each year. Citi’s Price Rewind and Quick Lock functions and the ability to request and track replacement cards are examples. The bank has seen a 15 percent increase in digital transactions over the last year and a 40 percent increase in mobile users.
As part of the move to be more digital-first, Citi has reduced its headcount by 12 percent through the redesign of its branch operating model and streamlining of its organizational structure, driving savings of $800 million.
“The transformation of our banking model to not only improve client experience but also efficiency,” Gerspach said. “Ultimately we expect to see our cost to serve decline by over 20 percent in our consumer business with the development of analog transactions, such as physical calls and paper statements and payments, and reduced by over a third by 2020.”