Citigroup’s Trading Revenue Falls amid Weakening Volatility
Institutional Clients Group
Citigroup’s (C) ICG (Institutional Clients Group) segment derives its revenue from equity, debt underwriting, strategic transaction advice, private banking, and market and security revenue. Trading revenue dampened in the second half of 2017, largely due to lower volatility, higher market valuation, and subdued expectations of returns.
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In the investment banking space (XLF), JPMorgan Chase (JPM) has the highest fees and ranking. While Bank of America (BAC) has improved its performance in recent quarters, Goldman Sachs’s (GS) and Wells Fargo’s (WFC) performance has weakened.
Year-over-year and quarter-over-quarter, Citigroup saw lower volatility across its equity, fixed income, and other product categories in 4Q17. Equity revenue fell 23%, fixed income revenue fell 18%, and security service revenue rose 14%. North American revenue rose 1%, European revenue fell 8%, Latin America fell 1%, and Asian revenue rose 6%.
Private and investment banking
Overall, ICG revenue fell 1% in 4Q17, helped by 9%–15% growth in private banking, lending, and investment banking, and partially offset by weaker trading revenue. Private banking revenue grew 15% in 4Q17, helped by corporate lending and wider interest rate margins.
The segment’s net income fell 7% to $2.2 billion, mainly due to lower trading revenue, higher credit losses, and reserve build-up. A spike in volatility could drive Citigroup’s trading revenue in 1H18, and a shift towards debt and related securities could improve its fixed income security revenue.