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Citigroup Q3 IB Fees to Rise 20% on Upbeat Debt Capital Markets
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At the 2024 Barclays Global Financial Services Conference, Citigroup's (C - Free Report) CFO, Mark Mason, stated that the company’s investment banking (IB) fees are anticipated to jump 20% in the third quarter of 2024 from the year-ago period. The projections of upbeat activity across debt capital markets and mergers and acquisitions are reasons behind this optimistic view.
Meanwhile, Citigroup expects markets revenues to decline nearly 4% compared with last year’s relatively strong third quarter.
At the same conference, other banks, including The Goldman Sachs Group, Inc. (GS - Free Report) and PNC Financial Services Group, Inc. (PNC - Free Report) , also provided an update on their third-quarter outlook. GS stated that the company is expecting trading revenues for the third quarter to decline 10% because of a tough year-over-year comparison and difficult trading conditions in August for fixed-income markets. PNC expects to post third-quarter net interest income (NII) at the high end of its 1-2% growth target announced in July.
Citigroup’s Credit Losses Rising
Mason also spoke about the shift in consumer spending from discretionary to more staple-type spending.
According to Mason, Citigroup’s Credit losses are rising as U.S. consumers shift spending to basic needs and away from purchases that aren’t vital. The company is witnessing a pickup in revolving credit while the payment rates have started to “come down a bit.” While credit card delinquencies have climbed, they are starting to crest, he added.
On a full-year 2024 basis, net credit losses are anticipated in the band of 3.5-4% in the company’s branded cards business and 5.75-6.25% in retail services. The cost of credit is expected to be $2.7 billion.
Citigroup’s FY24 & Medium-Term Outlook Reiterated
FY24
The company continues to expect full-year 2024 revenues in the $80-$81 billion band, driven by fee growth in the Services segment and a strong IB business.
NII, excluding Markets, is projected to be modestly down. Management expects the second half of 2024 to be a bit stronger than the first half.
Expenses are anticipated at the higher end of the $53.5-$53.8 billion band (excluding FDIC special assessment and Civil Money Penalties), down from $56.4 billion in 2023.
Medium-Term (2026)
Management believes to be well-positioned to achieve total revenue growth in the range of $87-$92 billion by 2026.
Expenses are expected in the high end of $51-$53 billion, excluding FDIC fees.
Return on tangible common equity is anticipated in the range of 11-12%.
Citigroup’s Regulatory Scrutiny
In July 2024, regulators fined Citi $136 million for failing to make adequate progress on resolving data management issues stemming from regulatory fines dating back to 2020. Regulators also needed the lender to demonstrate that it was allocating sufficient resources to those efforts.
At the Barclay’s conference, Mason also addressed investors’ concerns regarding this issue. He stated the bank is giving special attention to data, "which was the area where we got the feedback that we weren't moving fast enough. The company is also trying to improve the quality and speed of its data gathering, as well as standardization”, he added.
Final Words
The latest update follows strong and consistent growth for Citigroup, as evidenced by a revenue CAGR of 20% between 2021 and 2023.
The company is also riding on a strong rebound in the IB business. In the first half of 2024, the metric shone the brightest, with a 45% surge from first-half 2023 levels. Further, a strong capital and liquidity position is a favorable factor.
Year to date, shares of C have gained 19% compared with the industry’s growth of 22%.
Image: Shutterstock
Citigroup Q3 IB Fees to Rise 20% on Upbeat Debt Capital Markets
At the 2024 Barclays Global Financial Services Conference, Citigroup's (C - Free Report) CFO, Mark Mason, stated that the company’s investment banking (IB) fees are anticipated to jump 20% in the third quarter of 2024 from the year-ago period. The projections of upbeat activity across debt capital markets and mergers and acquisitions are reasons behind this optimistic view.
Meanwhile, Citigroup expects markets revenues to decline nearly 4% compared with last year’s relatively strong third quarter.
At the same conference, other banks, including The Goldman Sachs Group, Inc. (GS - Free Report) and PNC Financial Services Group, Inc. (PNC - Free Report) , also provided an update on their third-quarter outlook. GS stated that the company is expecting trading revenues for the third quarter to decline 10% because of a tough year-over-year comparison and difficult trading conditions in August for fixed-income markets. PNC expects to post third-quarter net interest income (NII) at the high end of its 1-2% growth target announced in July.
Citigroup’s Credit Losses Rising
Mason also spoke about the shift in consumer spending from discretionary to more staple-type spending.
According to Mason, Citigroup’s Credit losses are rising as U.S. consumers shift spending to basic needs and away from purchases that aren’t vital. The company is witnessing a pickup in revolving credit while the payment rates have started to “come down a bit.” While credit card delinquencies have climbed, they are starting to crest, he added.
On a full-year 2024 basis, net credit losses are anticipated in the band of 3.5-4% in the company’s branded cards business and 5.75-6.25% in retail services. The cost of credit is expected to be $2.7 billion.
Citigroup’s FY24 & Medium-Term Outlook Reiterated
FY24
The company continues to expect full-year 2024 revenues in the $80-$81 billion band, driven by fee growth in the Services segment and a strong IB business.
NII, excluding Markets, is projected to be modestly down. Management expects the second half of 2024 to be a bit stronger than the first half.
Expenses are anticipated at the higher end of the $53.5-$53.8 billion band (excluding FDIC special assessment and Civil Money Penalties), down from $56.4 billion in 2023.
Medium-Term (2026)
Management believes to be well-positioned to achieve total revenue growth in the range of $87-$92 billion by 2026.
Expenses are expected in the high end of $51-$53 billion, excluding FDIC fees.
Return on tangible common equity is anticipated in the range of 11-12%.
Citigroup’s Regulatory Scrutiny
In July 2024, regulators fined Citi $136 million for failing to make adequate progress on resolving data management issues stemming from regulatory fines dating back to 2020. Regulators also needed the lender to demonstrate that it was allocating sufficient resources to those efforts.
At the Barclay’s conference, Mason also addressed investors’ concerns regarding this issue. He stated the bank is giving special attention to data, "which was the area where we got the feedback that we weren't moving fast enough. The company is also trying to improve the quality and speed of its data gathering, as well as standardization”, he added.
Final Words
The latest update follows strong and consistent growth for Citigroup, as evidenced by a revenue CAGR of 20% between 2021 and 2023.
The company is also riding on a strong rebound in the IB business. In the first half of 2024, the metric shone the brightest, with a 45% surge from first-half 2023 levels. Further, a strong capital and liquidity position is a favorable factor.
Year to date, shares of C have gained 19% compared with the industry’s growth of 22%.
Currently, Citigroup carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.