Citi has eliminated $1.42 billion (£904 million) from technology and communications costs over eighteen months, through dramatic changes to servers and storage, better system integration and processes, and the elimination of legacy software.
Don Callahan, Citi’s chief administrative officer who reports to CEO Vikram Pandit, told Computerworld UK that the bank was moving forcefully to hit targets of slashing $3 billion from operational and technology costs by 2011. Plans were drawn up in May 2008, and cost reductions began to notice on the balance sheet at the start of last year.
The bank, until a few years ago one of the world’s largest with $25 billion annual profits, has had a troubled recent history with subprime mortgages, and recorded a $1.6 billion loss for the year to 31 December. Supported by US taxpayer money in the wake of the financial crisis, it paid $20 billion back to the US government last year, contributing to a loss of $7.6 billion for the final quarter.
Callahan said that efficiency in operations and technology (O&T) was now “critical” to “the company’s efforts to get fit.” The technology targets represent around a fifth of overall cost cutting at the bank.
Citi was “well ahead of schedule” with the O&T savings, he said. “We intend to be one of the most efficient operators in our industry, and we have made and continue to make significant progress against that goal”.
The bank had developed a “complex” IT setup by its own admissions, a result of the way it evolved into a mass of different businesses through acquisitions.
Callahan said that over recent months the “better” prioritisation of systems and processes, as well as the removal of redundant technology, were key steps in transforming Citi’s operations. A focus on “working smarter” and integrating processes and systems was driving the change, he said, adding that “there is still much work to do”.
The bank has been focusing on increasing “server, mainframe and storage utilisation”. Alongside this, it is consolidating its datacentres and making better use of facilities, and reducing the array of applications it uses.
Processes are being standardised in a number of functions and regions, “where it makes sense to do so”. There is also extensive work to improve hardware efficiency and system integration, and the bank sees that putting its various credit card businesses on a single IT software platform is a “high priority”. It has also started work to standardise on a single platform for its banking services.
Around half of the £904 million savings so far are attributable to technology and facilities transformational work, and a quarter to the sale of Citi’s Germany and Smith Barney businesses. This week, Barclays agreed to acquire Citi’s Italian credit card business.
But large scale redundancies have also contributed to the massive cost cuts. The 265,000 staff working across the group now represents some 58,000 fewer than a year ago. These steps and other “management decisions” represented a quarter of the operational cost cuts.
Callahan insisted Citi is “working to maintain service levels” across its business, during all the changes taking place. As the bank presses ahead with tough cost cutting, he said the technology changes were playing a vital part in its “stabilisation”.