Citigroup, the world’s sixth-largest bank, is shifting its significant digital transformation investments away “from third-party consulting to technology and full-time employees” said CFO Mark Mason.
Citigroup’s CFO was speaking on a Q2 2023 earnings call as Citi touted some significant automation progress across its IT estate: Citi has reduced manual touchpoints by 90% for its prime finance middle office, 90% for its equities middle office and by 31% for futures clearing it said.
Citi tech spend outstrips net income
The bank reported quarterly net income of $2.9 billion. Quarterly Citi tech spend outstripped that figure, at $3 billion; up 13%. This was, Mason said, “primarily driven by change-the-bank” spend.
The CFO reiterated broader annual expenses guidance of roughly $54 billion. Significant spending on a major transformation at Citi is happening to address "consent orders" – regulatory demands made after the Federal Reserve asked the bank to enhance its firm-wide risk management and internal controls in the wake of expensive errors.
(These include an incident blamed on out-of-date software and internal errors which led to the bank accidentally transferring nearly $1 billion of the bank’s own funds to several lenders, instead of a planned $7.8 million interest payment; an issue prevented neither by its existing Oracle Flexcube software, internal compliance, nor outsourcers at Wipro…)
Under pressure from investors to reduce this huge spending, CEO Jane Fraser took a positive spin: Citi has been, she said on July 14, the “first bank to launch 24/7, 365 dollar-clearing… we've got the instant payments platform we just launched for e-commerce clients, it's a story of innovation, it's a story of investment; it's got great returns.”
The earnings call came days after Citi released a new self-service “CitiDirect Commercial Banking” digital platform that it developed in close collaboration with clients. Citi described this as a single digital entry point to give commercial clients “data driven insights” and a “360° consolidated view… across cash, loans, trade, FX, servicing and onboarding.”
The $3 billion in quarterly technology investments also spanned platform and process simplification, security and infrastructure modernization, client experience enhancements, and data improvements, Mason said.
Transformation spend for the last quarter built on Q1 successes including retiring 20 trading platforms to consolidate around one and an ongoing process to move 39 loan servicing applications to a single platform. It also includes a deeper use of public cloud for “faster market risk calculations, data sharing, and instant payment”, according Q1’s investor deck.
Citigroup’s assets under administration climbed 11% to $2.4 trillion.