Magazine article American Banker

Citi Fixed-Income Revenues Leveling off after Slide, CFO Says

Magazine article American Banker

Citi Fixed-Income Revenues Leveling off after Slide, CFO Says

Article excerpt

Byline: Matt Scully

After four straight quarters of declines, Citigroup's fixed-income revenue -- a major income source for its investment banking arm -- is stabilizing, the bank's chief financial officer said Monday.

The third-largest U.S. bank expects to report third-quarter revenues "roughly in line" with the same period a year earlier, John Gerspach said at the Barclays Global Financial Services Conference in New York.

The declines began a year ago when uncertainty over the Federal Reserve's rate policy slowed U.S. bond trading to a pace now believed to be improving. Citi's fixed income business accounts for nearly 80% of revenue at the bank's markets group.

"A number of trading desks will have better revenue at the margin from inventory positions that have appreciated, given the modest move lower in rates," Jeff Davis, a managing director at Mercer Capital, said by email.

An unexpected rally in July has pushed the 10-year Treasury yield to 2.4% from 2.6% a year ago, spurring stronger trading among clients who believe rates should be trending higher, Davis said. "Nevertheless, fixed income continues to be a tough business vis-a-vis a few years ago."

Fixed income revenue growth remains modest but is improving industrywide, according to JPMorgan Chase's division heads for high-grade, interest-rate and asset-backed strategies in a client conference call Monday.

It could be too early to tell if Gerspach's comments will bode well for the bank and for others heavily dependent on fixed income sales, such as JPMorgan, said James Strecker, a director at Wells Fargo. …

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