Citigroup is expecting trading revenues to drop in the fourth quarter thanks to mayhem in the markets - and the firm may miss a key performance goal
- Citigroup is expecting fourth-quarter trading revenues to dip year-over-year, according to CFO John Gerspach.
- A spike in market volatility has negatively impacted the firm's fixed income business, as well as investment banking, he said.
- As a result, the firm may miss its stated goal of improving operating efficiency by 100 basis points year-over-year.
- "It's a much tougher revenue quarter then we would have anticipated," CFO John Gerspach said.
Citigroup is expecting trading and investment banking revenues to dip in the fourth quarter, and the bank could miss a key efficiency target, according to CFO John Gerspach.
While Citi's equities performance remains robust, the choppy market this fall has stunted progress in the bank's fixed income, currencies, and commodities (FICC) business, Gerspach said Wednesday at a financials conference.
"In markets, going into this quarter, we anticipated we would see year-over-year revenue growth in fixed income and equity markets," Gerspach said. "That's changed."
Citi expected some of the momentum from a strong third quarter in rates and currencies to carry through to the fourth quarter, but that didn't materialize - especially in the rates business.
"That combination of fixed income and equities revenues is likely to be lower than last year," Gerspach said.
On Tuesday at the same conference JPMorgan CEO Jamie Dimon said he expected trading results to be flat compared with last year, while Bank of America CEO Brian Moynihan said the firm's trading results are tracking up by a few percentage points.
A recent Credit Suisse report predicted that banks on average would see flat trading results during the fourth quarter compared to the same period a year prior.
Gerspach said that fourth-quarter market volatility has "definitely had an impact" and "put a drag on our fixed income and investment banking revenues," which he also expects to be down thanks to declines in equity underwriting and debt issuance.
The slide in fourth-quarter performance in these business lines means the bank is at risk of falling short of its goal of a 100-basis-point improvement in operating efficiency. He suggested the firm may end up in the 90-basis-point range instead.
"It's a much tougher revenue quarter then we would have anticipated," Gerspach said.