Citigroup upstaged by JPMorgan as revenue from bond trading dips

Citigroup shares slid in early trading Friday after the bank’s traders underperformed their peers at its biggest rival.

The firm cited a “challenging” market environment in the second quarter as fixed-income revenue fell 6%, a bigger drop than analysts expected, while JPMorgan Chase & Co. posted an increase. Citigroup reported a 19% gain in stock trading that also trailed JPMorgan.

While gains in other parts of the bank’s business, such as helping companies handle cash abroad, lifted Citigroup’s profit in the quarter, investors frowned on the relative trading performance. It marked a step backward, after Citigroup challenged JPMorgan in recent quarters for the top spot in fixed-income trading.

JPMorgan’s core loans expanded and trading revenue jumped 13% as volatility returned to stock markets, surprising analysts who’d been forecasting mediocre results in both businesses.

Citigroup shares declined 1.6% to $67.44 in early trading at 9:15 a.m. in New York.

Still, there were positives for the bank. Even as a global trade war looms, revenue from the firm’s treasury and trade solutions business jumped to a record $2.34 billion in the second quarter, up 11% from a year earlier.

Citigroup draws more profit from abroad than any U.S. rival, which gives investors reason to worry. President Trump’s escalating tariffs, an emerging market rout and the rise of a firebrand populist in Mexico — where Citigroup operates one of its largest units — contributed to a 7.9% drop in the shares this year through Thursday, the second-worst performer in the KBW Bank Index.

In recent months, Citigroup executives said they’re succeeding in persuading global companies to entrust their cash to the bank. Rising interest rates are boosting the profit it earns on deposits.

Such growth is especially desirable because it’s “sticky,” fueling earnings over time, Chief Executive Officer Michael Corbat told investors in late May.

Citigroup Chief Executive Officer Mike Corbat.

Citigroup Chief Executive Officer Mike Corbat.

Bloomberg News

While companywide revenue and operating expenses were in line with analysts’ projections, the bank still managed to beat profit estimates. That’s because its cost of credit improved, helped by a segment that includes assets being wound down.

The firm’s U.S.-branded card business — which includes proprietary products such as the Citi Double Cash card and cobranded offerings like its partnership with Costco Wholesale Corp. — posted a 1% revenue drop. Executives previously said they expect such revenue to increase 2% for the full year. Total card loan balances declined from the previous quarter, even as spending rose.

The firm’s investment banking business held up better than analysts predicted, generating $1.42 billion, helped by a 14% increase in advisory revenue. Across the industry, bank executives have warned that a trade war could lead companies to put off acquisitions and capital expenditures, damping dealmaking.

Here’s a summary of Citigroup’s earnings:

Net income jumped 16 percent to $4.5 billion in the quarter, or $1.63 a share. That beat the $1.57 average estimate of 14 analysts surveyed by Bloomberg. Revenue increased 2% to $18.5 billion. Operating expenses were flat compared with the same period a year ago at $10.7 billion. Revenue from equities climbed 19% to $864 million. The average estimate was for $910 million.

Bloomberg News

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