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Citigroup Would Benefit Least from a Rate Hike

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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.

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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.

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