Citigroup: Fixed Income Markets’ Revenue Declines in 1Q15
Citigroup’s 1Q15 Results Beat Expectations (Part 3 of 4)
Revenue declines for Institutional Clients Group
In the first quarter, Citigroup’s (C) ICG (Institutional Clients Group) segment’s revenue was down slightly from last year—primarily driven by lower fixed income markets’ revenue. Fixed income revenue was down 11% YoY (year-over-year)—mainly driven by weakness in spread products. The bank witnessed a slow start in spread products in 2015—compared to a fairly strong 1Q14.
Activity levels were low across distressed credit, non-investment grade CLOs (collateralized loan obligations), and municipals. Although there was strong activity in investment grade credit, the flows typically have lower spreads.
TTS (Treasury and trade solution) revenue was down 2% YoY. In constant dollars, TTS revenue grew 4% from last year, as growth in deposit balances and spreads more than offset a decline in trade revenue. The above graph shows the segment’s revenue by business.
Investment banking revenue was up 14% from last year—driven by strong M&A (mergers and acquisitions) and debt underwriting activity, partially offset by lower equity underwriting revenue.
North America consumer banking net income rises
North America consumer banking net income grew 12% YoY—driven by higher revenue, lower operating expenses, and a decline in credit losses. Total revenue was up 4%. Retail banking revenue grew 18% from last year—reflecting loan and deposit growth, higher mortgage origination activity, and improved deposit spreads.
Branded cards’ revenue was down slightly from last year as growth in purchase sale and improved spreads more than offset the impact of lower average loans and higher payment rates. The above graph shows the segment’s net income for the quarter—compared to the previous quarter and the same quarter last year.
Since the beginning of 2014, the bank sold or closed nearly 200 branches in North America, as part of its ongoing efforts to optimize costs. This contributed to the lower operating expenses, resulting in higher net income.
You may invest in the big four banks—JPMorgan Chase (JPM), Wells Fargo, (WFC), Bank of America (BAC), and Citigroup—through ETFs like the Financial Sector SPDR ETF (XLF). Together, these banks form ~27% of XLF.
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