Citi CFO expects investment banking fees to rise 20% in third quarter

CITIGROUP’S investment banking fees are expected to jump 20 per cent in the third quarter from a year earlier, chief financial officer Mark Mason told investors at a conference in New York on Monday (Sep 9).

The gains are being driven by a good pickup in activity across debt capital markets and mergers and acquisitions, Mason said.

Meanwhile, markets revenue is likely to drop about 4 per cent, he added, after a jump of 10 per cent last year wasn’t repeated in 2024.

The bank expects the US economy to achieve a so-called soft landing if the Federal Reserve cuts interest rates as anticipated this year.

Clients are also weighing the impact of the US presidential election in November and the potential economic policies of both candidates.

“There is a lot of discussion around the different policy views around different sectors, like energy, healthcare, consumer and what the result of an election might mean for those sectors,” Mason said.

In Citi’s consumer credit cards business, payment rates among customers are starting to decline, particularly for those who have lower credit scores, Mason said.

While credit card delinquencies have climbed, they are starting to crest, he said.

“There’s a dichotomy, if you will, between the higher FICO score and the lower FICO score customers,” with affluent customers increasing spending while lower-credit score customers switch their purchases to prioritize staples instead of discretionary items.

Citi was fined US$136 million by regulators in July for making insufficient progress on fixing data management issues from regulatory punishments dating back to 2020.

Regulators also required the lender to demonstrate it was putting enough resources towards those efforts.

The bank is giving special attention to data, “which was the area where we got the feedback that we weren’t moving fast enough,” Mason said in response to a question about the compliance work.

Citi is trying to improve the quality and speed of its data gathering, as well as standardisation, he said.

The bank is executing a plan required by regulators to ensure it has the number of people needed to finish the work.

“We’ve already put in place a review of how we’re proceeding against each of the initiatives” that were behind schedule, he said. The bank will analyze if more people are needed in areas where the work is delayed.

Citi’s profit beat Wall Street expectations in the second quarter, lifted by revenue in investment banking, markets and services. Its shareholder returns stood at 7.2 per cent during the period, short of its 11 to 12 per cent medium-term target.

Citi shares were little changed on Monday afternoon. They have risen 15 per cent so far this year, compared with a 19 per cent gain for an S&P 500 index of broader bank shares. REUTERS