Citi Fixed Income Crashes 21%, Worst Since 2011, In Ominous Sign For Wall Street

Monday, January 14, 2019
By Paul Martin

by Tyler Durden
Mon, 01/14/2019

While traditionally it is JPMorgan Chase that kicks off bank earnings season, this quarter, Citigroup is taking the spotlight with its just reported Q4 results (followed by JPMorgan and Wells Fargo & Co. on Tuesday), and its earnings numbers are anything but a welcome harbinger for what to expect.

Citi reported adjusted EPS (excluding tax reform effect) of $1.61, slightly better than the consensus estimate of $1.55, thanks to a drop in the company’s effective tax rate, which dipped to 19% in Q4, and would have been 21% ex-tax reform, both lower compared to the 25% a year ago.

That was it for the good news, because one look at the top line reveals an unexpected deterioration, as 4Q revenue of $17.1BN dropped 2% Y/Y and missed the consensus estimate of $17.6BN badly, dropping to a two-year low as a result of a plunge in fixed income markets revenue which fell 39% sequentially and 21% y/y to $1.94b vs estimate $2.23b. This was the lowest fixed income print since 2011, and the worst performance under CEO Michael Corbat.

While the FICC miss was disappointing, Bloomberg Intelligence banking analyst Alison Williams notes that even more important will be the outlook for trading in early 2019 and more detail on costs: “Rates and currencies is a key business for Citigroup, given its share of Citi overall revenue, but this could also signal weakness at peers since Citi and JPMorgan are leaders in global FICC.”

It wasn’t just fixed income: equity markets revenue also fell 16% q/q, however despite rebounded 18% y/y to $668MM, it also missed the $672MM consensus estimate.

The Rest…HERE

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