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What to Expect for Citigroup’s Trading Revenue in 2H17

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Market-driven trading performance

Commercial and investment bankers (XLF) have generated strong trading results over the past couple of years through sales and proprietary trading offerings. Rising markets (SPX-INDEX) (SPY), the Trump administration’s domestic manufacturing policies, and targeted financial reforms have attracted institutional and retail flow. Among major bankers, Bank of America (BAC), Citigroup (C), and JPMorgan Chase (JPM) have seen strong trading growth, whereas Goldman Sachs (GS) and Wells Fargo (WFC) have seen subdued growth in recent quarters.

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Citigroup’s markets and securities division saw a 5% fall YoY (year-over-year) and an 8% fall quarter-over-quarter to ~$4.4 billion. The subdued performance was largely due to an 11% revenue fall in equity trading and a 6% revenue fall in debt trading. These falls were partially offset by higher securities service revenue.

Lower volatility offsetting index growth

Overall, major currencies and markets saw lower volatility in 2016 after the Brexit vote. Asset managers have been deploying more funds towards equities, as reflected in the consistently higher valuation of broad equity markets. The pattern has been observed across the United States, Japan, Europe, and Asia.

Citigroup’s securities revenue rose 10% to $584 million due to higher volumes in its global custody business. The bank is expected to see a YoY fall in trading revenue in 3Q17, though its revenue could rise on a sequential basis due to volatility creeping in through geopolitical tensions.

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