Asked if Citi had received all of the government funding that it required — on Monday, Nov. 24, the day after the New York-based banking giant received its second bailout from TARP for a total of $45 billion in capital plus $306 billion in loan guarantees — CFO Gary Crittenden told CNBC, "Never say, 'Never.'"
The week leading up to the government’s second cash infusion into Citi began with the bank announcing the elimination of an additional 57,000 jobs worldwide, reportedly the second-biggest layoff in employment history. The week ended with Citi shares losing 60 percent of their value, hitting a 16-year low of $3.75 each. (By mid-December, shares were back above $7, compared to $30 a year ago.) Citi closed the third quarter with $2.05 trillion in assets, down $308 billion from a year earlier.
The bank, which has operations in more than 100 countries, declined a BS&T request for an interview on what the bailout means for the Citi organization generally and its financial technology spending in particular. Pointing to the global reach of the institution, however, Bart Narter, SVP of the banking group with Boston-based Celent, notes that "There are different animals within Citi, so you can’t [simply] say, 'What’s Citi doing?'"
For example, according to Narter, Citi’s Global Transaction Services, which is based in New York and provides cash management and trade services to big businesses, is a very strong constituent. "Citi's GTS is growing at 38 percent, so they may want to keep their technology leading-edge," he relates. "But Citi mortgages, Citi cards … ?" he asks rhetorically.
"Overall Citi's tech spending is going to go down in the U.S.," Narter adds, explaining that during a downturn, “Banks generally will shift from new investments to containing costs and will increase outsourcing."
The Beginning of a Turnaround?
Citi began efforts to turn around its performance in December 2007 with the appointment of Vikram Pandit as CEO, and the bank has made some top-level technology appointments since mid-2008, including the hiring of Marty Lippert as CIO (and his subsequent promotion to chief operations and technology officer) and the addition of BS&T Elite 8 2008 honoree Anita Sands as managing director of transformation.
Following the most recent cash infusion, Citi's Crittenden told CNBC, the bank is in a position "to make sure we make our contribution to the stability of the [financial] system." The preferred stock Citi is providing the government is “a fair coupon," he added, noting that the TARP funds come with "enhanced" restrictions on executive compensation. The government’s stake in Citi, Crittenden said, is capped at 7.8 percent.
When Pandit announced the 20 percent cut — representing 75,000 members of Citi's global workforce of 375,000 — in a Nov. 17 webinar with investors, "The impression of layoffs was generally exaggerated in media reports," according to Barry Deutsch, an independent consultant based in Coral Springs, Fla. About 23,000 positions had already been eliminated, he points out, and another 18,000 cuts will come from the sale of Citi units, including its German retail bank, abroad. That leaves 34,000 jobs to be cut, likely by mid-2009, with many expected to go in New York and London.
"Citi’s not dumping 52,000 people into the rolls of the unemployed," Deutsch notes. "About 9,000 ... were employed in the German retail bank that was sold [in early December], not closed. Many of those [people] can expect to be retained."