Citigroup’s investment banking revenue tumbled in the three months through June, signaling a broader decline across Wall Street as businesses wary of growing tariff costs refrain from issuing new stock and making costly acquisitions.
Fees from advising on corporate deals alone fell 36% to $232 million, New York-based Citi said Monday, while its stock-underwriting business shrank 6% to $314 million. That dragged total investment banking sales down 10%.
“Some of the broader things going on in the environment, whether it’s the changes in interest rates or the dialogue around trade and tariffs and what have you, have resulted in somewhat of a cautionary view from corporate clients,” Chief Financial Officer Mark Mason told reporters. That’s particularly true among companies in Asia, where President Trump’s tariffs have hammered China, the region’s largest economy.
The five largest investment banks, from JPMorgan Chase to Goldman Sachs, probably posted an average drop of 14% in merger-advisory revenue, 9% in stock-underwriting, and 20% in debt-underwriting, Brian Kleinhanzl, an analyst with the brokerage Keefe, Bruyette & Woods, estimated before Citi reported its second-quarter results.
While Citigroup bankers are talking regularly with clients, trade tensions are likely to weigh on corporate confidence through the remainder of the year, said Kenneth Leon, an analyst with CFRA Research.
U.S. economic growth, meanwhile, may dwindle to less than 2% this year as Trump’s global trade conflicts curb corporate investment, BlackRock, the world’s largest money manager, predicted earlier this month.
The warning from the Wall Street firm, which handles $6.5 trillion in assets, follows a truce between Washington and Beijing in which Trump agreed to delay further tariffs on Chinese imports while the two nations try to negotiate a trade agreement. Previously imposed duties of 25% on $250 billion of Chinese goods remain in effect, and the White House has threatened levies on automobile imports and French wine while expressing irritation with Vietnam.
“The U.S. has become an exporter of geopolitical and economic uncertainty as the administration implements its ‘America First’ approach,” Tom Donilon, chairman of the BlackRock Investment Institute, wrote in the firm’s midyear outlook.
The uncertainty is likely to lower business confidence, curb investment in new plants, and limit hiring, since executives aren’t sure how new policies will affect supply chains and costs. Only 65% of the leaders who participated in a Business Roundtable survey published in June expected sales to grow in the next six months, down from 73% in the first quarter and 80% at the end of last year, declines that were driven by trade conflicts.
For Wall Street banks, that kind of uncertainty plays out through market-sensitive businesses, Mason said.
Despite challenges in its trading and investment banking units, Citigroup’s total profit climbed 7% to $4.8 billion amid gains in retail banking and credit card loans.
Earnings of $1.83 a share, excluding a one-time benefit from an investment in electronic trading platform Tradeweb, were in line with estimates from analysts surveyed by FactSet. The bank’s shares fell 6 cents in New York trading on Monday to $71.71, paring gains so far this year to 38%.
