There is nothing quite like an impromptu market day off to sneak some bad news in hopes nobody will notice.
That's what happened today when during an investor conference in New York, Citigroup CFO John Gerspach said the bank expects market revenue in the current quarter to be slightly lower than last year. The CFO said the fall was driven by a decline in fixed-income market revenue - arguably the result of the blow out in yields which has resulted in a decline in trading volumes - while Citi's equity business is doing well.
"We had anticipated we would actually see year-over-year revenue growth in fixed income and equity markets," he said. "But while we've maintained, I'd say, good engagement with the clients, we just haven't seen that transition into transaction activity at the rate at which we had hoped."
Gerspach also warned that pressure on market-sensitive revenues could put the bank at risk of missing its efficiency targets. "The tight timeframe of having the ability to react could put us just a little bit short," he said.
Citi's outlook runs contrary to trends described by its competitors. Speaking at the same conference, JPMorgan CEO Jamie Dimon said he expects trading revenue should be roughly in line with last year. Even that was not enough for some, with KBW analyst Brian Kleinhanzl noting that Dimon's commeng that trading results are "roughly equivalent" to last year was weaker than what KBW had been forecasting. KBW models revenue growth of 11.6% y/y (FICC +10%, equities +15%) and moving to flat would take 7c off of KBW’s 4Q EPS est. (a drop of 0.8%), according to Bloomberg data. Dimon's comment was also largely lost in the noise of yesterday's broad market drop, which saw banks pummeled with JPM sliding 4.5% on Tuesday, it largest drop since the February VIXtermination event.
Meanwhile, Bank of America CEO Brian Moynihan said capital markets revenue should be up a few percentage points compared to 2017.