Citigroup Inc. 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, which claims 2,500 of the world’s 3,000 largest corporations as clients, now says it also is targeting U.S. companies with less than $20 million of 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,” Raj Seshadri, 45, head of small-business banking for New York-based Citigroup, said in an interview. “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 Co. 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.
“You’re going to have inventory loans, you’re going to have floorplan financing for different types of dealerships, you’re going to have receivables lending, you’re going to have lines of credit for businesses to make payroll,” Dennis said. “It’s totally different, and it requires a great deal of monitoring.”
Big Banks, Small Firms
The four largest U.S. banks, which also include Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co., 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 Association.
President Barack Obama in September signed the Small Business Jobs Act, creating a $30 billion program to help community banks make more loans to small companies. “When our small businesses don’t do well, America doesn’t do well,” Obama said last month after touring Woonsocket, R.I.-based American Cord & Webbing Co., which makes cords and fasteners.
Bulk of Lending
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, the biggest U.S. bank with $2.34 trillion of assets, plans to hire 1,000 employees in the next year to cater to companies with sales of $3 million or less, Chief Executive Officer Brian Moynihan, 51, said last month.
Citigroup, which had to get a $45 billion bailout in 2008, was still 12 percent owned by taxpayers as of Oct 1. The bank has about $2 trillion of assets overall. Wells Fargo, ranked fourth by assets, says it’s the nation’s biggest lender to small firms.
Small businesses are attractive customers because they use credit lines that pay “nice fat fees” and make deposits “at little to no interest rate,” said Ken Thomas, an independent bank consultant in Miami. They’re wealthier and more sophisticated than typical retail-banking customers, he said.
“It’s much easier to deal with somebody with six figures than Grandma or somebody in foreclosure,” Thomas said.
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