Citigroup Inc. is said to be switching its entire North American banking operations to a core processing application from Fidelity National Information Services Inc.

Many large U.S. banks are using core systems that are decades old, and observers have repeatedly said the applications are not up to the task of processing transactions in real time, as the market now demands.

However, cost and complexity have made financial companies balk at replacing them, and this project would put Citi in the forefront of a long-predicted wave of core replacements at the top U.S. banks.

"This is a big deal," said Bart Narter, senior vice president of the banking group at the Boston market research firm Celent. "This is Citi moving all of their U.S. deposits."

The news emerged Friday during a FIS conference call with analysts to discuss the company's fourth-quarter results.

"Citibank, which currently runs our core banking software in 30 countries around the world, has expanded its license and maintenance agreement to include its North American banking operations," Frank R. Martire, FIS's president and chief executive, said during the call.

When analysts asked for additional details, FIS's chief operating officer, Gary Norcross, said Citi is implementing his company's Systematics software, but provided few other details. "It's a very exciting strategic win for us," he said.

A spokeswoman for FIS would not provide any further information and a Citi spokesman declined to comment.

Narter said Citi currently uses two core systems in the United States — one on the West Coast and one on the East Coast — that were developed internally long ago. "They were just getting very, very nervous about its long-term viability, because the people who originally wrote it are no longer with Citi," he said.

Narter said Citi is already using the Systematics software for East Coast small-business deposits, and is planning to expand that — first to the rest of its East Coast deposits and then to replace the West Coast system. The New York banking company will also shift its consumer lending and small-business systems to the FIS product.

Narter said that Citi has projected that the project would run into the hundreds of millions of dollars, and is likely worth "tens of millions of dollars" to FIS.

Systematics is an older system, though it has a reputation as being "tried and true," Narter said, and despite its age still holds its own against modern alternatives.

One recent convert is Webster Financial Corp.'s Webster Bank in Waterbury, Conn., which switched to Systematics in 2005.

Christine Barry, a research director at Aite Group LLC, said, "I've been saying for the past four to five years that it's time for the large North American banks to replace their core systems."

Though Barry was not certain of the scope of the Citi project, "given the enormity of the undertaking," she said there would be immediate cost benefits.

Besides the core software, Martire said Citi has also begun using a FIS payment product to handle tax payments and bill collection for the state of California.

The new business, among other deals, reflects a more optimistic attitude among FIS clients, Martire said, after a year in which technology spending has rarely been a top priority for struggling banks.

"The tone and the tenor of our meetings with current and prospective clients is much more upbeat relative to what it was a year ago," he said. "Many banks that we spoke with believe that the worst is behind them."

Executives from FIS' rivals Fiserv Inc. and Jack Henry & Associates Inc. made similar comments during their quarterly calls last week.

FIS's fourth quarter was its first to include Metavante Technologies Inc., which it bought on Oct. 1.

"Early signs of cross-sales are very positive, and that showed in our Q4 signings," Norcross said.

Revenue rose 52% year over year, to $1.3 billion, in the quarter, thanks to revenue from Metavante. It posted a net loss of $52.8 million, compared with income of $30.0 million a year earlier.

For the full year, revenue rose 10%, to $3.8 billion, but net income dropped 51%, to $108.5 million.