Citigroup Investment Banking Fees Set to Surge 20% in Q3, Markets Revenue Expected to Drop: CFO
Citigroup's Chief Financial Officer, Mark Mason, revealed at a conference in New York that the bank's investment banking fees are projected to increase by 20% in the third quarter compared to last year. This growth is attributed to a rise in activity in debt capital markets and mergers and acquisitions. However, markets revenue is anticipated to decline by about 4% after a 10% jump the previous year was not repeated in 2024.
Mason also mentioned that the bank foresees a potential soft landing for the U.S. economy if the Federal Reserve follows through with expected interest rate cuts this year. Additionally, clients are considering the implications of the upcoming U.S. presidential election and the economic policies of the candidates.
In the consumer credit cards sector, Citi is seeing a decrease in payment rates among customers, especially those with lower credit scores. While credit card delinquencies have increased, they are beginning to plateau. There is a noticeable difference in spending behavior between high and low FICO score customers, with affluent customers increasing spending while lower-credit score customers prioritize essential purchases over discretionary items.
Citi faced a $136 million fine from regulators in July for not making sufficient progress in addressing data management issues dating back to 2020. The bank is now focusing on enhancing the quality and speed of data gathering, as well as standardization. Citi is also working on a plan to ensure it has the necessary resources to complete the required compliance work.
Despite these challenges, Citi exceeded Wall Street's profit expectations in the second quarter, driven by revenue from investment banking, markets, and services. The bank's shareholder returns fell short of its medium-term target, standing at 7.2% during the period compared to the goal of 11% to 12%. Citi's shares have increased by 15% year-to-date, slightly trailing behind a 19% gain for broader bank shares.
Overall, Citi's performance in the investment banking sector is expected to remain strong in the third quarter, while challenges persist in the markets and consumer credit cards businesses. Investors should keep an eye on the bank's progress in addressing regulatory issues and monitor the impact of economic events, such as the U.S. presidential election, on Citi's operations and financial performance.