With all the continuing financial pressure on banks, it was surprising to learn yesterday that Citigroup plans to continue to open new branches, despite its rising expenses.

What Citigroup needs — as do many banks — is a more enlightened approach to branch banking. I’m expecting that to be one of the major themes of 2012.

It is simply impossible for banks to consider their branches without also pondering the entire gamut of their retail banking operations. Online banking and mobile banking, in particular, have already changed how consumers view their banking practices (and the fees they pay — a topic I will address in a future blog). Banks should, too.

One bank that clearly understands this change is U.S. Bancorp. Richard Davis, U.S. Bancorp‘s chairman, yesterday laid out his principles for branch banking, and they deserve investigation. First, Davis said banks need to understand the changes in consumer behavior.

First of all, the transaction activity in the branches more likely, I think, we all agree is going to come down. People have, with mobile banking and just changing behaviors, they don’t see the need to come into a branch as often as they used it to meet with the teller for a nonconsultative activity just to move money across the counter.

Because of this, Davis said, banks need to change their branches’ DNA.

I think we also see an entirely higher value of this guidance-giving consultative role that you have for an investment decision, a trust, a long-term family trust, an opportunity to buy a home. And in this case with interests low, you can’t see the value of what branches will become when rates start to move up again. And the traditional old-fashioned CD, which just rolls over on its own, starts to become less attractive like it was 5 or 6 years ago because there is a less-insured alternative in a mutual fund or an annuity that really deserves a lot of conversation and some eyeball-to-eyeball opportunity or branches will kick in big time and will have all kinds of opportunities for them to become more effective.

So what should banks do practically? Here’s Davis’s recipe:

• Shrink the teller line;
• Increase the privacy areas;
• Change your hours to make the bank more available to people when they need to come and talk about something private and personal; and 
• Change the branch’s staffing composition accordingly.

But Davis emphasized that branches still serve a profound need.

[Y]ou still have those locations on the corner of Main and Wall, I guess, for people to come in and do what they can’t do over the phone, and probably for a long time, won’t want to do online.

2012 will be the year when banks — other than Citibank, it seems — will start transitioning their branch banking strategies. The transactional model just doesn’t work anymore. The faster banks realize this, the better.