Citi reported its fourth quarter results today. As at J.P. Morgan, there were bleak areas, but overall they weren’t too bad. – Revenues at Citi’s Institutional Clients Group (ICG) rose 7% and profits rose 16% in 2017 compared with 2016. At J.P. Morgan, revenues in the corporate and investment bank were up only 2% and profits were flat.
If you’re working for Citi’s investment bank, or are thinking of doing so, these are the takeaways.
You should work for Citi’s fixed income business
Fixed income sales and trading revenues are falling everywhere, but at Citi they’re falling less. As the chart below shows, revenues from fixed income trading at Citi were nearly on a par with J.P. Morgan in 2017. Five years ago, Citi’s fixed income trading business was $1.5bn smaller.
Nonetheless, fixed income trading revenues at Citi fell 18% in 2017. It was a particularly bad 12 months for spread products (credit trading), where revenues fell 28% – something which doesn’t augur well for Goldman Sachs’ intention of expanding in the credit sector. Revenues from Citi’s macro business (rates and FX trading) were down 15%.
Equities is a tricky business
Something bad happened to Citi’s equity derivatives business in the fourth quarter: the bank made a loss of $130m due to what it described only as a “single client event”. No further explanation was given.
The loss augurs badly for bonuses in Citi’s equities business. It also suggests that some of Citi’s recently hired equities professionals might be falling out of favour. Citi’s global equities business is run by Murray Roos (hired from Deutsche Bank in 2015) and Dan Keegan (joined in 2007) and the two men had been collecting plaudits from senior management for growing the business. Last year they hired in two Goldman Sachs MDs to drive equity derivatives growth and in 2015 they hired a selection of equity derivatives traders from Bank of America Merrill Lynch in Europe.
It’s not clear who was responsible for the $130m loss, but Citi’s equities business has lost some of its shine.
Avoid Asia if you like to work for a business with an improving bottom line
Profits at Citi’s Asian investment banking business were up 4% last year. That’s paltry when you consider that they were up 18% in Europe and 27% in North America. Nonetheless, the profit margins was a respectable 32% in Asia, compared with 27% in Europe.
Avoid ECM if you like a steady life
Lastly, Citi’s results suggest careers in equity capital markets (ECM) are not for the fainthearted.
Revenues in the bank’s ECM business were up 68% last year. This seems exciting, until you consider that Citi’s ECM revenues were down 30% in 2016. ECM is a volatile business to be in.
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