Citigroup is the first of the large U.S. banks to release Q2 2014 results today. Conveniently enough, they’re overshadowed by the fact that it also just unveiled a $7bn settlement with the Federal Reserve for selling sub-prime mortgage products in the run up to the financial crisis.
Citi offers little information on what it intends to do with headcount or pay within its results. However, here are some key takeaways when it comes to its investment bank.
Overall, revenues in Citi’s markets operations are down by 16% on this time last year and 21% on the previous quarter. Predictably, a 12% year-on-year slide on fixed income revenues have contributed to this – the usual excuses of “historically low volatility and uncertain macro environment" apply. More surprisingly, however, is just how badly Citi’s equity traders have done – revenues are down 26% on the same time in 2013 and 25% on Q1.
Citi already announced plans to cut a further 200-300 trading jobs in April, but has nonetheless been adding staff in equity research and, to a lesser extent, equity trading. This could grind to a halt.
Citi’s investment banking team was up 16% year on year and 27% on the previous quarter, and yet its advisory (M&A) division was down 12%. Citi is ranked 4th so far this year on all announced M&A deals, according to the latest Thomson Reuters data, but has slipped five places to 10th on the completed deals tables. Citi has a mere 11.9% of the deals completed so far on 2014, compared to 32% at Goldman Sachs and nearly 30% at both Morgan Stanley and JPMorgan.
Equity underwriting revenues still pale in comparison to those generated by the debt capital market teams – at $696m versus $1.3bn respectively – but ECM bankers at Citi have had a good year in line with the 20% uptick in deals globally, according to Thomson Reuters data.
Citi’s ECM bankers posted gains of 33% on the previous quarter and 26% on the first half of 2013.
Towards the end of last year, Citi’s LatAm business (along with JPMorgan’s) was booming on the back of reduced competition in the region, which bolstered investment banking revenues by a massive 45%. Now, growth is more muted – revenues increased by 5% on Q1, even if they’re down by 3% year on year, which was the only region to post positive results this quarter.
Asia, meanwhile, was down 13% year on year and EMEA revenues continue to slide – this time by 12% on Q2 2013.
As we pointed out earlier, Citi doesn’t break out compensation for its investment bank. However, expenses in the division were down by a mere 2%, suggesting that pay hasn’t been radically curtailed in the first six months of the year.