Citibank is ramping up its automation efforts and modernizing its platforms to maintain competitiveness and drive down costs.
The $1.7 trillion bank increased its technology and communications spend 12% year-over-year in the second quarter to $2.3 billion, according to Citi’s earnings supplement.
Spending will continue to climb, Chief Financial Officer Mark Mason said during the bank’s Q2 earnings call Friday, pointing to plans to invest in automation and infrastructure.
“So, with the move from manual to automation over time, those types of investments will yield benefits in our cost structure, and that’s part of what is going to bend the curve over that medium-term period,” Mason said.
Ultimately, the bank aims to drive down $7 billion worth of legacy operational expenses by utilizing more automation, he said.
WHY IT MATTERS: The bank has hired nearly 7,000 people in its tech department this past year, according to the earnings presentation.
“Undoubtedly, there’s going to be an increase in our expense base that reflects the underinvestment from the past and ensuring of safety and soundness and moving towards more automated operations and modernized operations,” Mason said.
THE BIG PICTURE: Chief Executive Jane Fraser said during Citi’s investor day in March that the bank would increase investment in technology to modernize operations and boost the company’s global presence.
The New York-based bank’s approach of “making some targeted investments in talent and technology,” will help the company in growing its wealth franchises, Fraser said in March.
BY THE NUMBERS: Citi reported in Q2:
- Revenue fell 9% YoY to $19.4 billion;
- Net interest income increased 16% YoY to $13.9 billion; and
- Cross-border transaction value jumped by 11% to $88 billion.
WHAT THEY’RE SAYING: Zacks analysts said in a report today that Citi has been “revamping its underlying technology, risk management and internal controls as part of remediation highlighted by the Office of the Comptroller of the Currency and the Federal Reserve.”
Zacks analysts expect expenses to have a compound annual growth rate of 1.9% on the heels of higher spending on compensation, technology, and Asia divestitures, according to the report.
STATE OF PLAY: Wells Fargo said today it increased its Q2 tech spend by 19% YoY to $9.5 billion. But Meanwhile, JPMorgan decreased its tech spend for a third consecutive quarter, down 5% to $2.3 billion.
FLASHBACK: Earlier this month, Citi launched CitiDirect Commercial Banking, a digital platform for its commercial banking clients as it continues to build out its digital offerings. The platform allows corporate clients to open accounts and manage accounts with one login, according to Citi.
