Banks may cut their services to the poorest Americans as a result of new U.S. financial regulations, including federal caps on debit card processing fees, Citigroup Inc Chief Executive Vikram Pandit said on Tuesday.

New U.S. laws, including the Dodd-Frank financial regulation act passed last year, will change banking, Pandit said in prepared remarks due to be delivered at an investors' conference in New York on Tuesday.

As part of that law, the Federal Reserve proposed capping the fees that merchants pay banks and card processing networks like Visa Inc every time a customer buys something with a debit card. The banking industry is furiously lobbying Washington against the proposed caps, and is hoping that a House of Representatives hearing on Thursday will help convince lawmakers to ease the debit fee proposals.

Citigroup has a relatively small U.S. debit card business, and has dismissed most investor concerns about the impact of the Fed's proposed caps. But in his remarks on Tuesday, Pandit said the law will cut into business at all U.S. banks.

On the retail side, margins will tighten, requiring banks to reevaluate the feasibility of extensive branch networks, think hard about who they serve, and devise new fee and cost structures, he said.

One inadvertent impact could be an increase in people in this country who lack access to financial services, he added.

His comments echoed those of JPMorgan Chase & Co CEO Jamie Dimon, who warned last month that up to 5 percent of Americans could lose access to traditional bank accounts from the law.

Banks have argued that they will have to add new fees to checking accounts and debit cards to offset approximately $13 billion expected to be lost out of an estimated $23 billion in annual debit card processing fee revenue, according to CardHub.com.

Citigroup will try to continue serving all of its customers cheaply by using new technology, including mobile and online banking services, Pandit said on Tuesday.

(Reporting by Maria Aspan, editing by Dave Zimmerman)

Citigroup Vikram pandit