Citi Warns Trading Revenue To Tumble 15% In Q3 Due To "Subdued Volatility"

Tyler Durden's picture

Exactly three months ago, in mid-June, Citigroup CFO John Gerspach warned investors at a Morgan Stanley investment conference that Citi's second quarter trading revenues would be down 12-13%, mostly due to declining market volatility. A few weeks later, he was proven right when US banks - and especially Goldman Sachs - posted some of the worst trading revenues in over a year.

Fast forward to today, when Citi did it again after CFO Gerspach, this time speaking at a Barclays conference, warned that markets revenue in the third quarter which is ending in less than three weeks, will be down 15%, as the third quarter "is lacking the volatility that pushed revenue higher in third quarter of 2016" underscoring as he did last quarter, that volatility remains “subdued." For that he, and his other banker peers, can thank the central banks, who have made selling vol and BTFD the only two concepts an entire generation of traders is aware of.

In a separate warning, the Citi CFO said that investment-banking revenue won’t match 2Q, will be more like 1Q, Gerspach says

On the positive side, Gerspach said that the bank is seeing earnings growth from North American consumer unit, and noted that its financial targets assume “measured” assumptions on the economy.

Following his comments, Citigroup stock briefly turned negative, before rebounding, and while banks pared some pre-market gains during his remarks, the move higher in the 10Y yield has quickly made investors forget that tumbling bank revenue are a far greater concern for profit margins than the already deplorable "NIM" trade. Indeed, at Gerspach spoke, same banks have been rallying as 10Y Treasury yields have risen ~6bps to 2.110%, and as sectors hit hard by Irma rebound.

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silverer's picture

"Subdued Volatility"

Surely these sophisticated market manipulators can come up with a one word term for that phrase. After all, they'll be using it quite often soon enough.

Arnold's picture

Pent up (or Unrealized) Demand falls in your same category.

grasha87's picture

I have devised a free market currency/scrip to help alleviate recesions and unemployment that the Federal Reserve System has caused:

https://bunky1787.wordpress.com/2017/09/06/the-wallark-neo-scrip/

Moving and Grooving's picture

What's the matter? Did Google stop paying $97. an hour?

jamesmmu's picture
Doug Casey: The Economy is Dominated by Political Entrepreneurs & Economic Parasites

http://investmentwatchblog.com/doug-casey-the-economy-is-dominated-by-po...

buzzsaw99's picture

cashing out all those inflated stock options is small comfort i suppose.  /s

Arnold's picture

I hope it boosted their Experian score.

http://www.experian.com/

mendigo's picture

Without volatility the market dies.

Otherwise would depend on value.

runnymede's picture

FAANGS, BTC

What part of this does Citi not get? Sentiment is the new fundamentals. 

falak pema's picture

The CBs have killed the buckaroo market of City's yahoos !

When deflation of 99% disposible revenue kills the market's ability to inflate BEYOND the proverbial asymptote.

"We are running out of savings and salaries-- past present and future-- to be the collateral that allows unlimited print."

Now with the legacy of Irma and Harvey, the government spend; the only financial pump in town and its via taxation-- Keynes's obligatory method-- to rebuild infrastructure that is resilient-- will require the market to move away from derivative scams.

No more tax holidays for the offshored trillions!

You can take a mule to water, but can you make it drink? 

Big existential question for Mr Mule of TBTF banksterised crony capitalism. He does need a kick up his ass.

Meanwhile Lady Lagard is ready to print the global SDR based on crypto-Houdini new financial fuel !

Doing what it takes...

grasha87's picture

I have devised a free market currency/scrip to help alleviate recesions and unemployment that the Federal Reserve System has caused:

https://bunky1787.wordpress.com/2017/09/06/the-wallark-neo-scrip/