Citigroup Inc.'s focus on its U.S. retail business may be starting to pay dividends.
The $1.6 trillion-asset New York company's consumer banking unit, Citibank, jumped seven places to grab the top spot in Sandler O'Neill & Partners LP's second annual ranking of sales and service at Manhattan bank branches, released last week.
John Stewart, the managing director of Citibank's North American branches, credited the climb to a two-year initiative to listen more closely to employee and customer feedback and make improvements accordingly.
"People always have things to say," Mr. Stewart said Monday in an interview. "The question is do they perceive that you'll listen to them and take their feedback credibly; and you've got to create an environment … [in which] folks believe that what they tell you you'll take seriously and you'll take action against. That's what we've been able to transform much more explicitly over the last two years."
In a report issued Sept. 26, Peter E. Nerby, a Moody's Investors Service Inc. analyst, upgraded Citibank's long-term deposits to Aaa and its financial strength to A, its highest ratings in the categories. Both ratings rose a single notch. Moody's commended Citi for putting its regulatory troubles behind it and investing in its branch network.
In conducting Sandler O'Neill's survey, Mark Fitzgibbon, its director of research, and his colleagues visited the same three branches of 13 institutions they visited a year earlier. They graded the institutions on branch appearance, professionalism, salesmanship, and product knowledge.
Citi's leap "was shocking to us," Mr. Fitzgibbon said in an interview Monday.
"Last year Citigroup ranked eighth, and what we did say is we really thought the branches were appealing, the people were bright and very professional - they just didn't seem particularly motivated," he said. "This year they were very motivated. They knew how to sell. They were asking the right questions. They made us think that the bank really had our best interest at heart, as opposed to trying to push the product du jour on us."
Mr. Stewart said that Citi remains focused on its branch personnel as it advances its plan to add 100 branches this year.
"You can start that exercise believing that it's a real estate exercise, but at the end of the day you realize it's a human resource exercise," he said. "You pick the 10, 11, 12 right people, and you can put them in any kind of facility, and they'd be successful. But you can build the most beautiful branch in the world, and if you don't select the right folks and empower them with the right tools, you're going to be a failure."
To help add services, Citi installed Smith Barney brokers in branches in opened last week in the Philadelphia and Boston markets. Mr. Stewart said the company plans to add Smith Barney brokers through the rest of its branch network by the end of next year.
Citi was not the only large company to improve its showing in this year's survey.
HSBC Holdings PLC, a $1.7 trillion-asset London banking company, also improved dramatically, according to the report; it rose six spots in the rankings, to fifth.
"We continue to elevate our brand and retail presence in the metro New York market, and we believe that continuing to provide outstanding service is a key differentiator for us," David Kotheimer, HSBC's senior executive vice president, wrote Monday in an e-mail to American Banker. "While the results of this survey are gratifying, it is important to note that we conduct our own mystery shopping on a daily basis throughout our branch network, and we continually act on those results."
Sovereign Bancorp Inc. of Philadelphia and JPMorgan Chase & Co. of New York were tied in this year's report for last place, which, because of two other ties, was No. 10.
JPMorgan Chase ranked 12th last year. Thomas A. Kelly, a spokesman for the $1.3 trillion-asset company, said in an interview last week that it has started taking steps to improve its Manhattan network, including refurbishing its branches.
"We continue to add bankers and mortgage officers in our locations to improve service," Mr. Kelly said.
On Sunday, JPMorgan Chase closed its deal to acquire Bank of New York Co. Inc.'s retail branches.
Mr. Fitzgibbon wrote in his report that Bank of New York's branches "resemble a funeral parlor," but that the branch staff were professional and comfortable selling products. Bank of New York rose seven spots in the rankings, to sixth.
The $88.8 billion-asset Sovereign entered the New York market through its June 1 acquisition of Independence Community Bank Corp of Brooklyn, N.Y., which ranked No. 3 in Sandler O'Neill's report last year.
Mr. Fitzgibbon said he was confused at Sovereign's Manhattan branches, because the signs out front said Independence, while everything inside was branded as Sovereign.
Ellen M. Molle, a Sovereign spokeswoman, said Monday in an interview, "It's premature to assess the bank's performance, because we are going through the conversion."
Mr. Fitzgibbon agreed that some of Sovereign's decline was probably related to the Independence acquisition.
"In fairness to them, if we shop them in a couple of months, we may have a different experience," he said.
Ms. Molle said that Sovereign has retained "nearly 100% of Independence's customers" and has received positive customer feedback about its free interest-bearing checking accounts, small-business lending, and cash management services.
