Investment banking, trading
Citigroup’s (C) Institutional Clients Group gets its revenue from investment banking, private banking, and market and securities revenues. The bank has witnessed higher growth in investment banking and private banking activity, partially offset by a subdued market and securities growth in recent quarters.
JPMorgan (JPM) is leading among all bankers (IYF) in investment banking revenues, followed by Bank of America (BAC) and Goldman Sachs (GS). Equities volatility spiked in 3Q17, whereas fixed income was lackluster for Citigroup in trading activity. Equities revenue rose 16%, and securities rose 12% for the market and securities subdivision.
Equity markets have taken a breather over the past few months after a stellar rally in the past year. The corporate tax rate cut from 35% to 21% should give corporations windfall profits, which should help in a revaluation of the overall indexes (SPY) (SPX-INDEX). North America managed a 14% growth in 3Q17, whereas other areas grew 6%–7%. Trading activity spiked in North America, which is an important driver for the sector’s growth in the upcoming quarters.
Private banking, investment banking
Overall, revenues grew 11% in 3Q17, helped by a 14%–15% growth in private banking, lending, and investment banking. Investment banking is gaining traction on underwriting for fund raising and transaction advising. Higher corporate lending to facilitate bridge financing, transactions, and syndication also helped higher interest income. The trend is expected to continue as Citigroup combines the expertise of investment banking and expanding its lending book.
Citigroup’s Institutional Clients Group’s net income rose 15% to $3 billion, helped by lower expense growth of 5% and a 9% spike in revenues.