Citicorp has put its cost of meeting year-2000 computer upgrade requirements at what is likely to be an industry high: $600 million.
The estimate appeared in a preliminary 10-K filing this week with the Securities and Exchange Commission.
The $310 billion-asset bank said the spending-spread over the three years through Dec. 31, 1999-would not have a material effect on earnings.
Though the $600 million figure is sure to raise eyebrows, financial analysts and experts on the year-2000 issue found it realistic and within reason.
Bradley G. Ball of Credit Suisse First Boston Corp. in New York said the number is "modestly higher than we expected (but) we believe it will be absorbed into Citicorp's overall expense base of $13 billion."
Citicorp "has done a little better (than others) in identifying all the things that need to be fixed," said Lou Marcoccio, Gartner Group research director. He said he expects "many other banks' estimates will go up."
The industry is still coming to grips with the magnitude of the problem, which stems from the fact that older computer programs are not prepared to record the calendar change from 1999 to 2000. Programs that read years in two digits may interpret "00" as 1900 instead of 2000, throwing interest rate calculations and many other business needs out of whack.
Citicorp, which has a long-standing reputation for technological sophistication, said it has already spent $150 million of the $600 million. It expects the bulk of its costs to come from remediation and testing over the next two years, Citicorp spokesman John M. Morris said Thursday.
"A major portion of these costs will be met from existing resources through a reprioritization of technology development initiatives, with the remainder representing incremental costs," according to the report to the SEC.
Mr. Morris pointed out that the annual outlays are relatively small within annual information technology budgets that well exceed $1 billion.
Citicorp is following the year-2000 project life cycle recommended by the Stamford, Conn.-based Gartner Group, according to James R. Devlin, director of the banking company's year-2000 enterprise project office.
"Our global target is to complete all reprogramming and testing efforts by Dec. 31, 1998, thus providing a full year for validation in production," Mr. Devlin said in November in testimony to the House Banking Committee in Washington.
"We feel we are on track to be ready for the coming of the millennium," Mr. Morris reiterated Thursday.
Analysts and consultants say other U.S. banks are not likely to spend as much as Citicorp, but they also fear many bankers are underestimating eventual costs.
The largest U.S. banking company, $366 billion-asset Chase Manhattan Corp., has projected spending $250 million over three years. Chase attributed the difference to its basic approach to technology and the fact that it has been through systems upgrades following its 1996 merger with Chemical Banking Corp.
"We tend to be more centralized in how we are organized around technology, so we have fewer individual systems and platforms to repair and test," said Brian Robbins, Chase's senior vice president of enterprise information technology architecture.
Though Citicorp is second to Chase on the U.S. bank asset ranking, Citicorp has the larger global presence, Mr. Morris said.