Citi EQD revenues hampered by low volatility

Citigroup has reported a drop in earnings for the second quarter of the year, with net income, at US$2.9 billion, down 36% year-on-year (YoY). Revenues fell by one percent to US$19.4 billion.

In banking, the long-awaited rebound in investment banking has yet to materialize, making for a disappointing quarter - Jane Fraser, CEO

Markets revenues, at US$4.6 billion, were down 13% YoY driven by both fixed income and equities, relative to an exceptional quarter last year coupled with low volatility this quarter, as ‘clients stood on the sidelines starting in April while the US debt limit played out’, according to Jane Fraser (pictured), CEO.

‘In banking, the long-awaited rebound in investment banking has yet to materialize, making for a disappointing quarter,’ Fraser stated. 

Fixed Income revenues were down 13%, as strength in the rates franchise was more than offset by a decline in currencies and commodities, while equities revenues were down 10%, primarily reflecting a decline in equity derivatives.

In US, Citi issued 1,131 structured products sold at US$3.5 billion in Q2 2023, down 37.5% by sales volume YoY (Q2 2022: US$5.6 billion from 1,430 products), according to SRP data.

The bank claimed a 12.9% share of the US market in Q2, second behind J.P. Morgan (17.4%) but ahead of  Goldman Sachs and Morgan Stanley, which captured a market share of 12.8% and 9.5%, respectively.

In Q2 2023, approximately 76% of Citi’s US sales volume came from products tied to equities, with equity indices the preferred underlying asset. Among these, US$1.2 billion was collected from 486 products linked to an index basket, while US$1 billion was gathered from 264 products tied to a single index.

Other jurisdictions where Citi actively issued structured products included, among others, Taiwan, France, Italy, UK, Germany, and Poland. Taiwan recorded the second-highest product issuance (after the US) with 121 products launched in the quarter, up from 62 products in the prior-year period.

Additionally, the US bank issued 63,926 turbos in Q2 23, maintaining its spot seen in Q1 2023 as the seventh-biggest provider of leveraged products in the quarter, behind Société Générale (152,205), J.P. Morgan (140,054), BNP Paribas (118,736), Goldman Sachs (106,128), Morgan Stanley (87,409) and Vontobel (79,927).

More than 99% of the leverage products issued between 1 April and 30 June 2023 were targeted investors in Germany (63,761), followed by those in Hong Kong SAR (165).

Wealth management and operating expenses

Personal banking and wealth management posted revenues of US$6.4 billion, a six percent increase YoY, driven by strong loan growth across US personal banking, while global wealth management revenues declined by five percent to US1.8 billion, impacted by continued investment fee headwinds and higher interest rates paid on deposits. 

Meanwhile, operating expenses increased to US$13.6 billion, up nine percent YoY, mostly due to investments in risk and control, ‘business-led and enterprise-led investments, volume growth and macro factors, including inflation as well as severance that comes from job cuts,’ according to the bank.

Citi has booked severance costs of approximately US$200m in the second quarter and US$450m year-to-date, largely in banking, markets, and functions.

In June, Claudia Koh (right), former managing director at UBP, joined Citibank’s international personal bank (IPB) as head of equities and equity structured products. Citi also appointed Rajat Madhok as global head of Citi commercial bank credit risk in late March.

Click the link to read the full Citigroup’s Q2 23 results, presentation and supplement.