Citigroup’s interest rate sensitivity
Citigroup’s (C) interest rate sensitivity is the lowest among its banking peers (XLF). A parallel increase by 100 basis points in interest rates would add $2 billion to Citigroup’s revenues. It compares to a $2.4 billion increase for Wells Fargo (WFC), a $5.3 billion increase for Bank of America (BAC), and a $2.8 billion increase for JPMorgan Chase (JPM). Higher interest rates would be negative for Citigroup. Higher credit costs would likely offset gains in net interest income.
In its recent 10Q filing, Citigroup shared projections for simulations of net interest income under different interest rate scenarios. As you can see in the above table, a parallel increase by 100 basis points in the short-term and long-term rates would lead to a rise of $1.9 billion in Citigroup’s net interest income. However, if the yield curve flattens and short-term rates increase by 100 basis points while long-term rates remain constant, the net interest income would rise by $1.9 billion. If short-term rates remain constant while long-term rates increase by 100 basis points, the net interest income would rise by $158 million. In contrast, a fall by 100 basis points in long-term rates would lead to a $201 fall in net interest income. Currently, the net interest income makes up 60% of Citigroup’s total income.