Citigroup Inc has been quietly scaling back its consumer banking presence in some of the world's major cities, pulling out from markets where it does not have enough branches to be competitive.

In 2014, Citi retail executives went from targeting 120 of "the world's top 150 cities" to homing in on 100 cities where the company has the greatest scale and potential. As a result, it is withdrawing from Tokyo, Lima, Panama City, and Houston, for example. In the United States, it is now focused on six cities, down from 14.

And while the bank has no specific plans to cut more branches in the near term, it will continue to re-evaluate its holdings, Jonathan Larsen, who oversees Citigroup's overseas retail branch business, told Reuters in an interview.

"We have to make sure that we are not subsidising marginal operations for long periods," Larsen said. The bank's strategy will work with fewer cities, he added.

Restructuring charges

Cutting back in consumer banking will eat into the group's earnings, at least in the near term. The bank is expected to book some $800 million of restructuring charges in the fourth quarter when it posts results on Thursday.

Chief Executive Michael Corbat has announced $2.4 billion of additional restructuring costs in the last two years. The bank hopes the spending will eventually save it some $3.4 billion annually.

The charge, in addition to an expected $2.7 billion charge for litigation, largely involving other businesses, is expected to all but wipe out Citigroup's profits for the fourth quarter. Analysts, on average, expect Citi to earn about 10 cents a share, down from 77 cents a year earlier, according to Thomson Reuters surveys.

The shift underscores Citigroup's challenge: how to shrink in locations where it lacks critical mass and yet prevent its global network from becoming less valuable to customers while it focuses on fewer cities.

Closures could hurt

Citigroup prides itself on being the most international of US banks and closures could hurt the visibility it needs as it continues to seek business with companies, institutional investors and governments in more than 100 countries.

The latest cuts came after the company raised its minimum thresholds for performance and prospects in consumer markets in the past year.

Higher targets are necessary because of increased costs of holding more capital and complying with additional regulatory requirements, including anti-money laundering rules, Larsen said.

Loose confederation

The company's global consumer business, which includes branch banking and credit cards, accounts for half of the company's revenue from its core operations. But Citigroup has struggled for years to make its consumer business more efficient. The group has long operated as a loose confederation of local franchises, many of which are not big enough in their individual markets to really be profitable.

A set of consumer assets that the bank marked for disposal last October produced a return on assets that was one-eighth the return of the bank's main assets, according to Citigroup disclosures.

In the United States, the bank decided to quit Dallas and Houston, where it ranked 24th and 33rd respectively by deposits. That decision was not easy - when the bank sold Texas branches in December 2013, it held onto Dallas and Houston, but last year, it changed its mind. The bank is instead focusing on Miami, Washington, New York, Chicago, San Francisco and Los Angeles.

Larsen said the closures around the world will allow Citigroup to put its resources where they can be more productive. He said, however, that Citigroup will keep branches in Korea, where it has struggled with regulations on consumer lending and where other foreign banks, such as HSBC, have given up. Citigroup took a restructuring charge in mid-2014 last year to close some Korean branches and now has 127 outlets there. He said Citigroup's share of the overall market in Korea is "small," but is larger among more affluent individuals.

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