If you’re casting around for a growth area in which to build your career, you may wish to pass over investment banking and move directly on to something else, like transaction services.
Citigroup’s fourth quarter and full year 2011 results, out today, do not look entirely pretty. Securities and banking revenues fell 7% at the bank last year; excluding the effects of DVA (the changing value of Citi’s own debt), they fell 15%.
Margins took a greater beating: when the flattering effects of DVA are excluded, profits in Citi’s securities and banking business fell 54% year on year in 2011. This is worse than JPMorgan where, when DVA was stripped out, 2011 profits at the investment bank were down 42%.
By comparison, revenues in Citi’s transaction services business rose 5% in 2011. Profits in transaction services still fell – but by a more moderate 7%.
And yet, despite the eurozone crisis and evident pain in its investment banking business, Citi’s EMEA securities and banking operations appear to have done ok: revenues in EMEA were up 5% last year, compared to a fall of 20% in North America, a fall of 7% in Latin America and a fall of 1% in Asia. Equally, net income across securities and banking in EMEA was up 11% in 2011, versus a massive 59% decline in the US, a 10% decline in Latin America and a 21% decline in Asia.
Citigroup was building its investment banking business in EMEA last year and today's figures suggest any hiring may have paid off. However, before Citigroup’s EMEA bankers get too excited about their bonuses for 2011, it’s worth bearing in mind that last year’s global revenue figures include $1.7bn of positive DVA gains across the securities and banking business and that it’s not clear how these gains were allocated regionally. Citi’s EMEA investment banking profits totalled $2bn in 2011; excluding DVA they could be a lot lower than they seem.
Citigroup has apparently dispensed with two senior North American credit traders. (Bloomberg)
Expatriate bankers are likely to return to Australia in their droves this year, ramping up competition for finance jobs. (Perth Now)
London’s Square Mile is shrinking faster than any financial center in the world. (Businessweek)
Forget the carried interest on private equity deals from 2005 and 2006. (Financial News)
Wall Street compensation is not whimsical. (New York Times)
Mervyn King warns that banks face another bonus backlash. (Guardian)
The BBC gave its top four managers bonuses of £275k. (Daily Mail)
Steve Jobs action doll pulled from the shelves. (Irish Independent)