NEW YORK (Reuters) - Citigroup Inc (C.N) is facing a unique dilemma among the four largest U.S. banks: it is light on deposits from individuals, an important funding source that costs little and tends to stick around.
While big rivals grew deposits dramatically after the 2007-2009 financial crisis from their broad networks of branches, Citigroup backed out of all but six U.S. cities and closed one-third of its branches.
The bank is now trying to up its game with a new app it plans to begin marketing in the third quarter. Executives hope it can lure deposits without opening new branches, acquiring a rival or beating competitors’ rates – three ways to collect deposits with their own costs and risks.
“People are willing to switch to a bank that is able to provide this kind of mobile-first experience,” David Chubak, head of global retail banking and mortgage, said in a statement, citing customer research Citigroup conducted.
The app, which does not have a name, will augment the bank’s push to expand its wealth management business, he said.
Competing for deposits is important as interest rates rise. When banks start reporting second-quarter results on Friday, investors will be closely watching deposit levels and what they cost.
Companies including former General Motors subsidiary Ally Financial Inc (ALLY.N), Discover Financial Services (DFS.N) American Express Co (AXP.N) and Goldman Sachs Group Inc (GS.N) have gone after deposits through mailings, call centers and digital tools. Those efforts, some going back decades, have gathered about 5 percent of U.S. deposits, according to consulting firm Novantas.
Lately, some small and regional lenders are also looking to expand their reach digitally at a relatively low cost.