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Major U.S. bank cutting fees on checking accounts

Citigroup Inc. will halve the minimum balance on checking accounts with the highest level of service, in a push to get more customers to use the bank for their primary accounts.

Clients with Citigold accounts can avoid monthly fees if they keep $50,000 in combined balances at Citigroup starting Nov. 1, the New York-based bank said in an e-mailed statement. Citigroup also plans to eliminate fees for some account holders at the basic account level. A formal announcement of the new policies may come as early as today.

The changes may help Chief Executive Officer Vikram Pandit stem a slide in North American consumer banking. Citigroup has slipped to fourth place by deposits in the U.S. after losing a 2008 takeover battle for Wachovia Corp. to Wells Fargo & Co., and the unit’s first-half profit fell by 83 percent. Pandit, 53, shook up management in January, installing Manuel Medina-Mora to take over from Teresa “Terri” Dial.

“If we offer a much better service than what our customers are getting today, they are going to bring more of their business to us,” Citigroup’s U.S. retail-banking head, Brad Dinsmore, said in an interview. “By lowering the threshold to $50,000, it will allow us to offer Citigold to more customers.”

Citigold accounts were developed at predecessor Citicorp in the 1980s under then-CEO John Reed to attract affluent savers. They come with a dedicated hotline, free checks, theater promotions and fee waivers on wire transfers. Until now, the minimum balance to avoid a monthly $25 fee for Citigold service was $100,000.

Latin America

Medina-Mora, 60, climbed through the ranks at Citigroup’s Banamex subsidiary in Mexico and still oversees the company’s Latin America division. He signaled in a July memo to employees that an expansion of the Citigold program would be one of several “multiyear investments” to revive the North American consumer unit.

Dinsmore was hired by Dial in 2009 from Bank of America Corp. and now reports to Medina-Mora.

The monthly fee for Citigold customers who don’t meet the lowered minimum will be $30, according to the statement. They can get the fee waived if balances including a first mortgage total at least $250,000. The standard-service Citibank accounts are free as long as customers keep at least $6,000 in combined deposits, credit-card balances, mortgages and retirement accounts.

Basic Accounts

Citigroup, 18 percent owned by the U.S. government following a $45 billion bailout in 2008, also plans to eliminate fees on its lowest-level “Basic Banking” accounts, as long as customers perform transactions such as direct-deposit of paychecks or debit-card purchases at least five times a month, according to the statement. Basic customers who don’t meet that quota must pay $8 a month.

The transaction minimum is designed to encourage people to use their accounts frequently so they’ll eventually use more services and take out loans, Dinsmore said.

“If a customer does their day-to-day banking with Citi, they don’t have to worry about balances,” Dinsmore said. “They’re going to bring their business to us and they’re going to grow their relationships over time.”

The North American consumer unit has 13.3 million accounts, 1,002 branches and $145.5 billion of deposits, according to figures on Citigroup’s website. It earned $84 million during the first half of this year. Citigroup has climbed 16 percent this year on the New York Stock Exchange.

Wells Fargo has the biggest U.S. retail network with 6,445 branches and $532.8 billion of deposits and had $3.22 billion of first-half earnings, according to the San Francisco-based bank’s website.

Branch Network

Bank of America’s retail bank had 5,900 branches, $411.7 billion of deposits and $1.35 billion of first-half earnings, according to a filing from the Charlotte, North Carolina-based bank.

Because Citigroup’s U.S. branch network is clustered in higher-cost cities of the northeastern U.S., Florida, Texas and California, it already caters to a higher-balance clientele than peers. Its deposits per branch are about $145 million compared with $82.7 million at Wells Fargo and $70 million at Bank of America.

The Citigold program caters to customers with international dealings who want “global investment expertise” and “worldwide privileges,” according to its website. “Once you’re a Citigold client, you can be assured that you’ll receive special treatment in every area.”

The focus on Citigold marks at least the third time Pandit has adopted a strategy first articulated by Reed at Citicorp. Soon after becoming CEO in late 2007, Pandit began promoting the company’s ability to manage cash globally for multinational corporations. The company’s banking network, which stretches across more than 100 countries, was expanded under Reed and his predecessor, Walter Wriston.

Last year, Pandit began discussing plans to leapfrog competitors by developing new technologies and pushing online and mobile banking, similar to the way Reed marked Citicorp as an innovator by deploying automated teller machines in the 1980s.