Online Shift Trims Citi’s Russian Bank (Branches)

Regulatory oversight may have the impact of reducing some banks’ physical footprint abroad.

To be specific, that may be the case in at least one geopolitical battleground, and where Russia is the site of at least some of the trimming.

As reported by Reuters, the Russian arm of the U.S. banking giant Citi said it will reduce its physical presence in Russia – reducing office count, actually – but that business should in fact grow in 2019. The branch count should decline to 15 from 22 by the end of this year. That comes from Michael Berner, the consumer business manager of the Russian operations, who is also a Citi Russia board member.

And yet, the bank has said this week, too, that Russian assets under management grew by 24 percent in the past year, and as Reuters reported, retail client accounts and deposits were up 8 percent year on year – and Citi thinks that growth rate is sustainable. As noted by the newswire, western banks through the past five years have faced increasing pressure in the region, in part due to sanctions levied in the wake of Russia’s annexation of Crimea.

The seeming dichotomy between reducing physical locations and a boost in business speaks to an embrace of digital banking, where the Interfax news agency has said that client base is being targeted for a shift from banking done in person (that is, retail banking). Citi has been in the region for more than 25 years, and is still growing in a market of state-owned banking giants, where five banks control 60 percent of Russia’s banking assets. The shift to online banking, in this respect, represents a data point in a trend, as banks have been reporting a net decrease in their branch counts in tandem with growth in mobile activity.

Citi’s total branch count, for example, was down 2 percent year on year, according to supplemental filings, and where the latest tally at year end was 2,410.

In the latest period, digital customers were defined as those individuals who used all online or mobile services within the past 90 days through November 2018. Citigroup said that active mobile customers – defined as users of mobile services through mobile apps or mobile browsers – were 11 million, gaining 12 percent.

Separately, JPMorgan said in its own earnings report issued earlier this month that the number of branches continued to decline to roughly 5,000, down from 5,130 last year. At the same time, the average number of mobile customers was up 11 percent to 33.3 million at the end of the year, while total active digital customers were up to 49.3 million at the end of December, from 46.7 million a year ago.


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