Dive Brief:
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Revenue from Citi's trading operations would likely drop by around 30% year-over-year, the bank's CFO, Mark Mason, said Tuesday at a Morgan Stanley-run virtual conference.
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Mason’s comments follow JPMorgan Chase CEO Jamie Dimon's prediction Monday that his bank's trading revenue would decline 38% in the second quarter compared with a year ago.
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The present quarter is “a very different place than we were a year ago,” Mason said, adding that Citi’s gains in equities trading would be tempered by a fall-off in fixed income. Investment-banking fees, he said, could also slump by a mid- to high single-digit percentage.
Dive Insight:
Bank executives have been warning that recent gains were likely unsustainable. This week's comments from Mason, Dimon and Morgan Stanley CEO James Gorman show a shift to expectation-management mode — not by stressing that the current trend is bleak but emphasizing that last year, by comparison, was phenomenal.
In flagging Monday that fixed-income securities and equities trading is slowing this quarter, Dimon said, "The quarter last year was exceptional. Last quarter was exceptional. This quarter is what I’d call more normal."
That echoes JPMorgan Co-President Daniel Pinto, who said this year he expects “more normalized volumes in line with 2019 with some degree of growth.”
Dimon predicted JPMorgan would see trading in the second quarter at “a little north of $6 billion, which is still pretty good.”
Gorman, too, warned Monday that fixed-income trading would slip. “Obviously, it won’t be where we were in the first quarter, which was gangbusters, or a year ago,” Gorman said. “They were the two best quarters by far in our history, but certainly not a bad quarter and some really encouraging signs.”
As for Citi, Mason said revenue from the bank's North American consumer business is likely to drop by roughly 15%. Consumers have been paying down their loans at high rates thanks to the stream of stimulus payments over the past year, Mason added. That has stunted loan growth for Citi’s U.S. card unit, he said but predicted loan growth would “start to pick up” in the second half of 2021.
Mason said he won’t be adjusting the bank’s full-year guidance for costs, which sees expenses climbing as much as 3% — to somewhere between $11.2 billion and $11.6 billion in the second quarter, compared with $10.4 billion a year ago.
Citi, Mason noted, has " spend that we’re making in the way of transformation.” The bank is boosting its investment in risk management and internal controls after regulators fined it $400 million last year. But also, Citi is retooling its consumer footprint — exiting 13 retail markets in Asia and Europe and doubling down on wealth management.
Despite the warnings, Dimon did his level best to highlight bright spots.
“Investment banking, it could be one of the best quarters we’ve ever seen,” he said Monday. “I would just use a number like up 20% for prior year [and] prior quarter. It could be 15, 20%. The reason for that is there are big deals that may or may not close.”