Bond trading slowdown hits Citigroup's Q3 results
NEW YORK: Citigroup Inc posted weaker-than-expected third-quarter earnings yesterday, hit by a drop in bond trading revenue after the United States Federal Reserve (US Fed) refrained from changing its bond buying programme and customer activity fell.
The US Fed's decision took investors by surprise and led many to take a wait-and-see attitude until there is a clearer time frame for the end of the central bank's economic stimulus programme.
The third quarter is typically a slow one for bond trading, and this was exacerbated by the US Fed announcement, according to analysts. Citigroup's bond trading revenue dropped 26 per cent, or US$956 million (RM3.04 billion), excluding an accounting adjustment.
In last year's third quarter Citigroup took a pre-tax charge of US$4.7 billion related to selling its Smith Barney brokerage business, a charge that ended up costing Vikram Pandit, then the bank's chief executive officer, his job.
Pandit's successor, Michael Corbat, has struggled to boost the banks fortunes in an environment where client business is tepid and new regulations are raising banks' expenses.
On some fronts, Corbat is making progress. Citigroup has winnowed down the assets it is looking to shed, known as Citi Holdings, to US$122 billion, down 29 per cent from a year earlier and down seven per cent from the second quarter. Citi Holdings now accounts for a little more than six per cent of the bank's overall assets, compared with about nine per cent in last year's third quarter.
But results were weak at many businesses at Citicorp, the bank's main operations. Revenue for its retail banking business fell seven per cent to US$9.24 billion, and revenue for its securities and banking business fell two per cent to US$4.75 billion.
Under generally accepted accounting principles, net income rose to US$3.23 billion from US$468 million a year earlier. Reuters