Stricken financial services group Citigroup will slash investments in IT as part of its plan to restore profitability.

“It is clearly feasible for Citigroup to take 10, 15, 20 per cent off its cost base, especially in information technology and operations,” the bank’s chief executive Vikram Pandit told the Financial Times.

Citigroup is one of the banks most affected by the economic downturn, with a record $9.8bn (£4.9bn) loss for the last quarter of 2007, and analysts expect the business to report further losses of more than $4bn today.

Earlier this year, Citigroup cut off 161,000 credit card users of its online bank Egg after it identified the accounts as "high risk".

Although the economic downturn has yet to hit IT spending, businesses worldwide already anticipate budget reductions in technology spending, said Gartner research vice president for emerging trends Mark Raskino.

“We are looking at a confusing and mixed pattern when it comes to future budgeting plans, but companies will reprioritise investments for IT depending on the severity in which they have been impacted by the crunch,” said Raskino. “And banks are likely to cut costs in technology because they are closer to the core of the credit crisis."

But the current economic conditions will also present an opportunity for companies to make strategic IT investments and emerge in a better shape after the recession.

“There is a distinct possibility that businesses will give a close look at their technology plans and take advantage of the present situation to build a competitive advantage over their peers,” said Raskino.