The largest U.S. lenders have spent years overlooking Black-owned banks. Now, as the smaller firms face extinction, Citigroup is hoping to bring them into the fold.
This week, the lender offered one such firm, Houston-based Unity National Bank, the chance to put up $1.65 million for a $13.95 million loan for 93 affordable housing units. Citigroup is following up on a September promise to help these minority depository institutions, or MDIs, finance as much as $50 million in affordable multifamily rental housing.
“We never would have been considered because our lending limit would have never been large enough to come to the table,” Unity National Bank CEO Laurie Vignaud said in an interview. “But Citi made sure there was a piece that we could participate in.”
The number of Black-owned banks in the U.S. has dwindled from 48 to 18 over the last two decades, and their combined assets have declined since the 2008 crisis. While one loan deal can’t solve a crisis decades in the making, it’s another sign that the biggest lenders have begun taking steps to help.
The approach compares to the direct equity investments Bank of America made in 10 MDIs in recent months, and the $24.6 million that Morgan Stanley pledged to
While Citigroup has pledged as much as $50 million in growth capital to MDIs, its work with Unity National Bank shows the firm is also seeking to take a different path. Citigroup has recruited more than a half dozen lenders to be part of a mentoring program to help them learn the ropes of underwriting bigger loans.
“This is how we change the narrative: long-term sustainable opportunities,” Harold Butler, a managing director in Citigroup’s public-sector group inside its investment bank, said in an interview. “We’re not viewing these relationships as something we can get from them.”
“I appreciate the equity investments, and it’s very, very important,” Vignaud said. “But there’s multiple tools in this toolbox, and in this particular instance Citi provided other banks with a model they can also include in addition to the equity investments.”
Citigroup is committed to expanding the mentorship program after its latest construction-loan partnership with Unity National Bank, said Gina Nisbeth, a director of structured lending and investments at Citi Community Capital, the firm’s community-development arm.
And the lender hopes other major banks will join it.
“The leadership has clearly said this isn’t a coin-operated endeavor,” Butler said. “If your expectation is that there’s a wallet opportunity here, I’m just going to say ‘Next.’ ”
