Citi Markets Revenue Falls 13% After Second-Quarter Peak
Markets revenue dropped to $6.11 billion from $7.01 billion as equity markets fell 25% and fixed income 7%, even as firmwide net interest income rose 14% year over year.
Citigroup (C) Markets revenues fell 13% sequentially to $6.11 billion from $7.01 billion, as Equity markets dropped 25% to $1.73 billion and Fixed Income markets declined 7% to $4.39 billion. The sequential drop reversed a second-quarter rebound in which Markets had posted $7.01 billion of revenue.
Firmwide revenues, net of interest expense, were $23.8 billion, down 4% from $24.8 billion in the second quarter. Net interest income increased 14% year over year, driven by growth in Markets, Services, Wealth and U.S. Consumer Cards, partially offset by declines in All Other and Banking. Non-interest revenue decreased 4%, driven by declines in Markets and U.S. Consumer Cards, largely offset by growth in All Other, Services, Banking and Wealth.
Services revenues were $6.61 billion, up 4% from the prior quarter, with Services net interest income up 4% to $3.67 billion on higher average deposit balances and deposit spreads. Treasury and Trade Solutions revenues were $4.9 billion, up 16% year over year, and Securities Services revenues were $1.7 billion, up 13% year over year. Services RoTCE was 31.2%. Services net income was $2.6 billion, up 27% year over year.
Wealth revenues were $3.27 billion, up 3% from the second quarter, with Wealth net interest income up 20% on higher deposit spreads and average deposit balances. Net new investment assets rose 143% sequentially to $38 billion from $16 billion. Wealth RoTCE was 14.3%. Wealth net income was $585 million, up 93% year over year.
U.S. Consumer Cards revenues were unchanged sequentially at $4.66 billion. Net interest income rose 5% to $5.42 billion, while non-interest revenue fell 15% to a $758 million net credit. USCC RoTCE was 21.8%. USCC net income was $851 million.
Banking revenues declined 11% sequentially to $1.73 billion from $1.95 billion. Investment Banking fell 13% to $1.35 billion as ECM dropped 19% to $343 million and DCM fell 18% to $601 million, while Advisory rose 4% to $406 million. Banking RoTCE was 19.2%. Banking net income was $378 million.
All Other (managed basis) revenues fell 18% sequentially to $1.43 billion from $1.74 billion, with Legacy Franchises down 10% to $1.85 billion. All Other (managed basis) net loss was $(955) million.
Average loans rose 3% sequentially to $809 billion from $785 billion, with end-of-period loans at $820 billion; growth was led by Markets, Services, U.S. Consumer Cards and Wealth. Average deposits rose 2% sequentially to $1.53 trillion from $1.50 trillion, with end-of-period deposits at $1.51 trillion, driven by Services.
Net credit losses declined 8% sequentially to $2.22 billion from $2.40 billion, while the net ACL build widened to $333 million from $102 million, lifting total provision to $2.59 billion. The provision was driven by changes in the macroeconomic outlook and portfolio growth. Total non-accrual loans decreased $0.4 billion, or 12%, from the prior-year period to $3.3 billion.
The efficiency ratio widened 110 bps sequentially to 58.5% from 57.4%, as total revenues fell faster than the 2% decline in operating expenses. ROE declined 130 bps sequentially to 10.1% from 11.4%, and RoTCE fell 150 bps to 11.5% from 13.0%. The CET1 ratio was 12.8%, unchanged from the prior quarter, while the supplementary leverage ratio declined to 5.0% from 5.2%; the firm returned $4.1 billion to common shareholders. Chair and CEO Jane Fraser said Citi expects to exceed this year’s return target even as it pulls forward investments toward an 11%–13% near-term goal.