JPMorgan CEO Dimon Warns of Bigger Trading Revenue Drop
Citigroup Inc. dropped after Chief Financial Officer Mark Mason signaled that revenue from the bank’s trading operations will probably fall by around 30 per cent from a year ago -- as Wall Street braces for a pandemic-driven boom to run out of steam.
Revenue from the business could drop by a percentage in the low thirties in the second quarter, Mason said Tuesday at a Morgan Stanley virtual conference. That’s a bigger decline than analysts in a Bloomberg survey were anticipating and comes as investment-banking fees could also fall by a percentage in the mid-to-high single digits, he said.
The current quarter is “a very different place than we were a year ago,” Mason said, noting strength in the firm’s equities trading business would be offset by a weaker performance in the fixed income unit.
Citigroup shares fell 1.8 per cent to US$73.82 at the close of trading on Tuesday. The stock has jumped 20 per cent this year compared with the 26 per cent advance of the 65-company S&P 500 Financials Index.
Mason follows JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon in predicting a slowdown in some businesses after a year of pandemic-induced market volatility helped banks deliver a bumper crop of profits. Dimon said on Monday that trading revenue at the biggest U.S. bank would fall to just north of US$6 billion in the second quarter, amounting to a 38 per cent decline from a year ago, and a bigger drop than previously expected.
Consumers -- aided by the trillions of stimulus pumped into the U.S. economy by the federal government -- have continued to pay down their loans at high rates, Mason said. That’s weighed on overall loan growth in the firm’s U.S. card unit.
In all, revenue from the North American consumer business is likely to drop by roughly 15 per cent, he said. The lender is also expecting to release reserves it had set aside to cover souring loans.
Citigroup’s expenses for the quarter will probably be in the middle of an US$11.2 billion and US$11.6 billion range, Mason said, noting the firm has been spending more on efforts to satisfy a pair of consent orders it received from regulators late last year. The firm recorded US$10.4 billion in operating expenses in the same period a year ago.
For now, Mason said he wouldn’t be adjusting the firm’s full-year guidance for costs, which has expenses climbing as much as 3 per cent.
“We also as you know, have spend that we’re making in the way of transformation,” Mason said. “We’ve also continued to invest strategically in areas like wealth, areas like investment banking.”