Citigroup’s multiyear modernization strategy saw progress in the second quarter as the bank’s tech investments proved more necessary after the Federal Reserve Board penalized the bank this week.  

“We have made meaningful progress in executing our transformation and simplifying our multiyear undertaking,” Chief Executive Jane Fraser said during the $2.4 trillion bank’s earnings call today. “This was never going to be linear, but I can assure you the investments we have been making are starting to come together to reduce risk, improve controls and deliver very tangible outcomes.” 

During the quarter, the bank continued to execute these tech-driven efforts:

• Nearly 300 applications retired year to date; 

• Consolidation of two forecasting platforms; 

• Investment in automation and systematic reporting; 

• Launch of a gen AI production pilot internally; and 

• Upgrade of ATM network with new software to improve customer experience. 

BIGGER PICTURE: The Federal Reserve Board issued a civil penalty to Citi this week for failing to comply with enforcement actions regarding data-quality management and risk control issued in 2020, according to the board’s July 10 release.  

The bank will pay $61 million to the Fed and $75 million to the Office of Comptroller of the Currency, according to the release. 

“These actions pertain to the consent orders we entered into with both agencies in 2020 and these orders covered four primary areas: risk management, data governance, control and compliance,” Fraser said during the earnings call. “It is a multiyear effort to modernize our infrastructure, unify disparate tech platforms and automate processes and controls.” 

Chief Financial Officer Mark Mason added that efforts to address the regulatory work are underway. He said the bank has reduced the number of applications and the number of data centers it has.  

“There’s a lot more work to be done around the data,” he said, “We have to make sure that the data that’s going into these reports is the quality of data we want it to be.” 

BY THE NUMBERS: In Q2, Citi reported: 

• Net income increased 10% year over year to $3.2 billion; 

• Total revenue increased 4% YoY to $20.1 billion;  

• The bank’s efficiency ratio clocked in at 66%; 

• Headcount fell 5% YoY to 229,000; and 

• Branch count shrunk 2% YoY to 641,000.  

NOTEWORTHY: The bank appointed Tim Ryan as head of technology and business enablement in June, according to Citi’s earnings presentation.  

He is responsible for Citi’s technology and legacy franchise teams and works to drive process simplification and modernization, according to Citi’s website.  

MARKET REACTION: Shares in Citigroup (C) were down 1.8% from market open at 2:12 p.m. ET to $62.86. Citi has a market capitalization of $123 billion.  

FORWARD LOOK: The bank plans to continue to invest in transformation and technology to modernize operations and risk and control infrastructure, Mason said during the call.  

“We expect these investments to offset some of our pay and headcount reduction going forward,” he said.  

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