Citigroup is planning to significantly decrease its dependence on information technology contractors and hire thousands of employees for IT as the bank deals with regulatory repercussions related to data governance and control deficiencies.
The head of technology at Citigroup, Tim Ryan, recently informed employees that the bank intends to reduce external contractors to 20% of its IT workforce from the current 50%. The internal presentation, reviewed by Reuters, did not specify a timeline for these changes.
Under the reorganization, Citigroup will recruit more staff, aiming to have 50,000 technology employees, up from 48,000 in 2024, as outlined in the presentation.
Citigroup stated to Reuters, "Citi is growing our internal technology capabilities to support our strategy to improve safety and soundness, enable revenue growth, and drive efficiencies."
The latest developments of the IT restructuring highlight Citigroup's efforts to comply with regulatory requirements to enhance risk management and data governance.
Since joining Citigroup from PwC last June, Ryan has been instrumental in addressing the bank's data management challenges, following regulatory pressure for insufficient progress.
The bank's CFO, Mark Mason, emphasized in January that Citigroup is increasing its investments to tackle data-related issues, leading to a revision of its profitability target for 2026 amid growing regulatory costs.
The presentation noted a $22.9 million "recent fraud event" associated with external contractors, which also included legitimate work, as disclosed by an anonymous source familiar with the matter.
In response to the fraud incident, Citigroup stated, "In the rare instances that we detect any fraudulent activity, whether internally or by a vendor, we take immediate action to hold those responsible accountable for their actions."
Citigroup has previously raised concerns regarding fraud and unethical conduct, indicating a potential tightening of contractor oversight.
The bank plans to reduce the number of external suppliers from 144 to 50 and gradually increase the workforce in higher-cost locations like New Jersey, New York, and Irving, while expanding in lower-cost locations including Chennai, Belfast, and Warsaw.
Analyst Mike Mayo from Wells Fargo remarked, "It seems to be one more step on the reconfiguration of their systems to fix long-standing problems. They are better than they were a decade ago, but still need to improve."
Citigroup shares were down by 0.7% on Thursday afternoon trading, contrasting with a 1.1% dip in the S&P 500. The bank shares have registered a 4.4% loss this year.
Additionally, Citigroup is planning to relocate its IT team currently based in Rutherford, New Jersey, to a consolidated site in Jersey City next year, with no technology operations remaining in Rutherford, apart from other teams that will continue to operate there.