Diversification of Services in Retail Banking Business. Example of Citi’s Development in Russia

Abstract

Publications about Russia’s banking system lack substantial analysis of the multinational banks’ subsidiaries development — their market entry, influence on competitive environment. There is not enough research on advantages of the universal bank model and economy of scale and economy of scope, which are required for successful development of a retail bank. However these topics are important for the managers, working on a bank’s strategy, for the regulators, defining the legal environment for banks, and for the experts, studying the banking services market. The purpose of this article is to give an overview of these topics based on example of Citi’s franchise in Russia and to outline the strategy, which Citi has chosen for its development in Russia. Special focus is made on the role of economy of scale and diversification, defined as a strategy of widening of the range of products and services. Citi Russia is chosen as an example of a successful, dynamically growing bank. It is part of one of the world’s largest international banking groups, and it has grown a well diversified client base and product range. Also we provide an example of one of current Citi Russia strategies, launch of Mini-Offices, to illustrate the bank’s main strategic approaches.

Keywords:

retail bank strategy, universal bank, foreign banks, economy of scale, economy of scope, diversification