Revenue in Citigroup’s bond-trading business slid 21 percent at the end of last year amid speculation about the speed of Federal Reserve interest-rate hikes and the strength of the U.S. economy.
The unit garnered $1.94 billion in the three months through December, the New York-based lender said Monday. The first of the major Wall Street firms to report quarterly earnings, Citi’s performance may offer an indication of how the industry performed during a particularly volatile December.
While market gyrations “resulted in a challenging trading environment,” interest-rate concerns and trade disputes have yet to slow real growth in the U.S., where unemployment is near record lows and wages are starting to grow more rapidly, Chief Financial Officer John Gerspach told reporters.
“That is something that you need to watch toward the end of 2019 and into 2020,” however, Gerspach added.
Not only did the U.S. central bank raise short-term rates in December for the ninth time since they were cut to nearly zero during the financial crisis, prompting blowback from the White House, global concerns mounted that Britain’s departure from the European Union and a U.S.-led trade war would slow growth.
Economists and corporate executives alike have warned that President Trump is unlikely to solve U.S. trade issues with China that include intellectual property theft and restrictions on American businesses before a trade truce between the world’s two largest economies expires at the beginning of March.
If no deal is reached by that time, the administration has threatened to more than double tariffs on $200 billion of Chinese imports to 25 percent and impose duties on another $267 billion in shipments, which may slow expansion in both nations.
“Elements of concern are just piling up, spanning the escalating trade battle between the U.S. and China, Brexit, and evolving interest rate policy from the Fed and the European Central Bank,” said Axel Pierron, managing director of capital markets management consultancy Opimas. “The question is: Has the bank made enough efficiency gains in past years to weather worsening market conditions?”
While Citi’s fixed-income slump helped drag company-wide revenue down by 2 percent to $17.1 billion, profit climbed nonetheless. Earnings rose 14 percent, to $4.22 billion, excluding one-time charges and benefits, as the bank curbed expenses and extended more loans.
“We made solid progress throughout 2018 towards our longer-term financial targets,” CEO Michael Corbat said in a statement.
Citi climbed 4.3 percent to $59.15 in New York trading on Monday, widening its gains this year to 14 percent.
