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What’s Driving Citigroup’s Institutional Clients Group?

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Underwriting and advisory revenues

Citigroup’s (C) ICG (Institutional Clients Group) segment earns revenue through equity and debt underwriting, transaction advisory, trading, and private banking. Trading revenues have picked up substantially for all major players (XLF). However, as Citi earns the majority of its trading revenues through debt offerings, it has seen lower growth on a relative basis mainly due to rising rates. The bank could see higher trading revenues if rates stabilize and investors make fresh entries into debt offering.

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In 1Q18, Citigroup’s market and securities revenues rose 3% to $5.0 billion helped by volatility across equities, currencies, and commodities partially offset by weaker performance in fixed income offerings. Goldman Sachs (GS), Morgan Stanley (MS), Bank of America (BAC), and JPMorgan Chase (JPM) have managed stellar growth in 1Q18. Equity revenue rose 38%, fixed income revenue fell 7%, and security service revenue rose 16%.

Advisory revenues 

Citigroup is also focusing on improving its performance in investment banking, private banking, and lending. The bank saw 6% growth in banking revenues helped by 21% growth in private banking, 19% in corporate lending, and 8% in Treasury solutions partially offset by a 10% decline in investment banking revenues. Banking and Treasury revenues rose on rates, lending, and higher penetration. On the other hand, the investment banking division underperformed the sector due to a lower number of closures in the quarter.

ICG’s net income rose 11% to $3.3 billion mainly due to lower credit costs, lower taxes, and higher revenues. For the overall segment, North American revenue declined 7%, European revenue rose 11%, Latin America rose 4%, and Asian revenue rose 24%.

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