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At a recent industry conference, Citigroup Inc’s (C - Free Report) CEO Jane Fraser indicated improvement in the investment banking (“IB”) business and provided an update on its reorganizational efforts.
She noted an improvement in corporate client sentiments, merger activity and debt-underwriting business. As for advisory fees, the bank will have to wait for deal completions.
With this, management expects IB fees to sequentially improve in the low-teens range in first-quarter 2024.
However, market revenues are expected to reduce by 8%-12% in the first quarter relative to a strong comparable quarter in the prior year.
The company expects its major reorganization efforts to be completed by first-quarter end. The reorganizational efforts include business structure simplification into five businesses, eliminating some committees and optimizing management by reducing roles.
In particular, the company made changes to its operating model in the fourth quarter of 2023. This will likely result in the elimination of approximately 5,000 managerial roles, leading to around $1 billion of run-rate savings.
Over the medium term, Citigroup’s transformational strategies, including business exits and reorganizational efforts, are expected to reduce its headcount by 20,000 job roles, excluding its workforce in Mexico. This is expected to result in total savings of about $2-$2.5 billion.
After being recently rebuked by the Office of the Comptroller of the Currency and the Federal Reserve to make urgent changes in the way it measures default risk of its trading partners, the company said it is addressing these problems. It is focused on improving data governance, risk and controls and automation.
Over the past six months, shares of Citigroup have gained 36% compared with the industry’s 28.5% growth.
At the UBS Financial Services Conference, JPMorgan’s (JPM - Free Report) CFO Jeremy Barnum said that while the bank’s trading revenues are anticipated to increase sequentially in the first quarter of 2024, driven by normal seasonality, revenues in the markets division will likely decline 5-10% on a year-over-year basis.
At the conference, Barnum also shed some light on the expected performance of JPM’s investment banking business.He said that first-quarter 2024 investment banking fees are expected to rise by a low-to-mid teens percentage on a year-over-year basis.
Goldman Sachs’ (GS - Free Report) CEO, David Solomon, is also not that optimistic about the performance of the company’s investment banking business. While Soloman said that “it's gotten better” compared with “super anemic” activity during parts of 2022 and 2023, he does not expect investment banking to climb back to historical averages over the last decade.
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Citigroup (C) Expects Higher IB Fees in Q1, Lower Market Revenues
At a recent industry conference, Citigroup Inc’s (C - Free Report) CEO Jane Fraser indicated improvement in the investment banking (“IB”) business and provided an update on its reorganizational efforts.
She noted an improvement in corporate client sentiments, merger activity and debt-underwriting business. As for advisory fees, the bank will have to wait for deal completions.
With this, management expects IB fees to sequentially improve in the low-teens range in first-quarter 2024.
However, market revenues are expected to reduce by 8%-12% in the first quarter relative to a strong comparable quarter in the prior year.
The company expects its major reorganization efforts to be completed by first-quarter end. The reorganizational efforts include business structure simplification into five businesses, eliminating some committees and optimizing management by reducing roles.
In particular, the company made changes to its operating model in the fourth quarter of 2023. This will likely result in the elimination of approximately 5,000 managerial roles, leading to around $1 billion of run-rate savings.
Over the medium term, Citigroup’s transformational strategies, including business exits and reorganizational efforts, are expected to reduce its headcount by 20,000 job roles, excluding its workforce in Mexico. This is expected to result in total savings of about $2-$2.5 billion.
After being recently rebuked by the Office of the Comptroller of the Currency and the Federal Reserve to make urgent changes in the way it measures default risk of its trading partners, the company said it is addressing these problems. It is focused on improving data governance, risk and controls and automation.
Over the past six months, shares of Citigroup have gained 36% compared with the industry’s 28.5% growth.
Image Source: Zacks Investment Research
Currently, Citigroup carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Outlook of Other Banks
At the UBS Financial Services Conference, JPMorgan’s (JPM - Free Report) CFO Jeremy Barnum said that while the bank’s trading revenues are anticipated to increase sequentially in the first quarter of 2024, driven by normal seasonality, revenues in the markets division will likely decline 5-10% on a year-over-year basis.
At the conference, Barnum also shed some light on the expected performance of JPM’s investment banking business.He said that first-quarter 2024 investment banking fees are expected to rise by a low-to-mid teens percentage on a year-over-year basis.
Goldman Sachs’ (GS - Free Report) CEO, David Solomon, is also not that optimistic about the performance of the company’s investment banking business. While Soloman said that “it's gotten better” compared with “super anemic” activity during parts of 2022 and 2023, he does not expect investment banking to climb back to historical averages over the last decade.