Citigroup is set to slash IT budgets and cull jobs as part of a massive cost-reduction programme to resuscitate its balance sheet.
The move, orchestrated by chief executive Vikram Pandit, paints an even more depressing picture than the focussing of IT investment mentioned in the bank's previous financial statement.
Pandit, CEO since December, said the bank would reduce IT spending and undertake a major re-alignment of the firm's IT operations, in order to carve 20 percent off costs, after it posted a $5.1 billion (£2.6 billion) loss for the first quarter. Citi is planning to cut up to 9,000 jobs in Q2, though it has not specified whether IT roles would go. Financial analysts predict 25,000 jobs would go by the end of the year.
“It is clearly feasible for us to take 10, 15, 20 percent off our cost base, especially in information technology and operations,” Pandit told the Financial Times.
Out of its £8.1 billion cost base in the quarter, Citi spent $1.2 billion (£600 million) on technology and communication, up 25 percent on the same quarter in 2007. Total ICT expenditure last year was $4.5 billion (£2.3 billion) out of $61 billion overall expense.
Citi has made a number of conflicting statements on its IT investment strategy over the past few months. In January, Citi said one of its key goals for this year was to invest in technology. “We intend to leverage the benefits of emerging technology to respond more quickly, communicate more effectively, simplify transactions and innovate faster, thus serving our global clients better,” it said.
But in its April 2007 expense review, the firm said it planned to rationalise servers, reduce legacy platforms, and maximise the IT operating capacity to cut costs.
Charles Prince, then chief executive, had said he asked management to “eliminate organisational, technology and administrative costs that do not contribute to our ability to efficiently deliver products and services to our clients”.
Pandit has so far rejected to calls to split up the group, which has over 200 million banking accounts, and a huge raft of investment customers. It was formed in 1997 from the merger of Citicorp bank and the Travelers insurance and brokerage business.
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