Citi CFO Anticipates 20% Increase in Investment Banking Fees for Third Quarter – Reuters

By Tatiana Bautzer and Manya Saini

NEW YORK – Citigroup’s investment banking fees are projected to rise by 20% in the third quarter compared to the same period last year, according to Chief Financial Officer Mark Mason, who spoke to investors at a conference in New York on Monday.

Mason attributed this increase to a rebound in activity in both debt capital markets and mergers and acquisitions. However, he also noted an anticipated decline of about 4% in markets revenue after a 10% increase in the previous year did not carry over into 2024.

The bank is optimistic that the U.S. economy will experience a soft landing if the Federal Reserve follows through with expected interest rate cuts this year. Additionally, clients are closely analyzing the implications of the upcoming U.S. presidential election in November and the varying economic policies proposed by the candidates.

Mason further commented on the conversations taking place among clients regarding how potential election outcomes may affect various sectors, including energy, healthcare, and consumer markets.

In Citigroup’s consumer credit card division, Mason observed a decline in payment rates among customers, particularly those with lower credit scores. While delinquency rates on credit cards have risen, Mason indicated that these rates are beginning to stabilize.

"There’s a dichotomy, if you will, between customers with higher and lower FICO scores," Mason explained. Affluent customers are increasing their spending, whereas those with lower credit scores are shifting their purchases to focus on essential items rather than discretionary spending.

REGULATORY ISSUES

In July, Citigroup faced a fine of $136 million from regulators for not making sufficient progress in addressing data management issues related to past regulatory infractions dating back to 2020. Regulators have instructed the bank to allocate adequate resources to rectify these shortcomings.

Mason emphasized that the bank is prioritizing data management in response to regulatory feedback concerning the speed of progress in this area. The bank is taking deliberate steps to enhance the quality, speed, and standardization of its data collection processes.

Citigroup is implementing a regulatory plan to ensure it has the necessary personnel to fulfill its commitments. Mason mentioned that the bank has instituted a review system to assess the progress of all initiatives that are running behind schedule. This includes evaluating whether more staff are needed in certain areas to meet deadlines.

Citigroup’s earnings in the second quarter exceeded Wall Street expectations, bolstered by growth in investment banking, market activities, and service revenues. The bank reported shareholder returns of 7.2% during this period, which fell short of its medium-term target of 11% to 12%.

On Monday afternoon, Citigroup’s stock remained relatively stable. Year-to-date, shares have increased by 15%, compared to a 19% rise for a broader index of bank stocks.