Citi redefines its strategy and bets on growth in small and medium-sized enterprises.

Citi is making a significant shift in its business strategy by focusing on small and medium-sized enterprises (SMEs), a sector that had previously not been on its radar. With the intention of doubling its revenue in commercial banking, the American bank is making key investments and hiring top talent to strengthen its presence in this segment. This move is not only a response to an internal shift in focus but also addresses the growing competition in the banking sector. To lead this new effort, Citi has hired a prominent banker from Barclays who will be responsible for expanding commercial banking operations in the United Kingdom. This move underscores the seriousness with which the bank is taking its new direction, aiming to capture companies with annual revenues ranging from $10 million to $3 billion. Additionally, Citi has launched a dedicated unit for smaller businesses in Japan, a country where demand for financial services for SMEs has been increasing. A noteworthy aspect of this expansion is the recent acquisition of a stake in Numerated, a fintech that uses artificial intelligence to enhance the analysis and management of data related to business loans. This move not only demonstrates Citi's commitment to modernizing its operations but also highlights the importance the bank places on innovation and technology in its growth strategy. Despite Citi generating over $3 billion through its commercial banking division last year, this figure represents only a small fraction of its total revenue, which hovers around $80 billion. However, the bank's leadership sees considerable potential to double this revenue by diversifying and directing its attention toward a historically underserved market. The establishment of new units dedicated to commercial lending in six countries over the past two years, including Canada, Switzerland, Germany, France, and Ireland, emphasizes Citi's ambition to become a key player in the global SME sector. By appointing several regional heads in its commercial banking division, the bank aims to build a strong network that allows it to effectively meet the needs of these businesses. Tasnim Ghiawadwala, who leads Citi's commercial banking division, emphasizes that the bank has the capacity to offer mid-sized corporate clients the same services it provides to large corporations. This not only demonstrates Citi's versatility but also suggests a more effective cross-selling strategy following a restructuring that has involved the elimination of thousands of jobs. Although Citi does not disclose specific figures regarding the financial performance of its commercial banking unit, it has been indicated that its return on equity exceeded 30% in 2021, positioning it as one of the bank's most profitable divisions. This high level of profitability indicates that the strategy of focusing on SMEs could be a highly lucrative path. The shift toward serving smaller clients also occurs in a context where many regional banks are facing challenges due to a higher interest rate environment, limiting their lending capacity. This creates additional space for Citi and other larger banks to capture the attention and business of small and medium-sized enterprises seeking financing. However, Citi is not the only bank seeing SMEs as a growth opportunity. Competitors like Bank of America and Wells Fargo have also launched strategies to expand their service offerings to this market segment. Competition in the commercial banking sector is intensifying, suggesting that Citi’s focus could shape a new landscape where servicing small and medium-sized enterprises becomes a key development area for traditional banks. In conclusion, Citi's decision to focus on small and medium-sized enterprises represents a significant strategic change that could transform its business model. The combination of new hires, investment in technology, and a renewed focus on customer service could not only help Citi increase its revenue but also establish long-lasting relationships with a sector that, although previously undervalued, is vital to the global economy.