Citigroup (C) Projects Q2 Trading Revenues To Descend Y/Y

At the Morgan Stanley Financials Conference in New York on Tuesday, Citigroup Inc.’s (NYSE:C) Chief Financial Officer, John Gerspach, announced its latest outlook for the second quarter. The bank expects second-quarter 2017 fixed income and equity markets revenue to fall 12–13% year over year, affected by low volatility in bond and equity markets.

"Volatility has been very low this quarter, which has certainly led to somewhat of a softer trading environment, especially in the fixed income and equity markets," said Gerspach, speaking at the conference in New York.

Earlier in June, at a Deutsche Bank (DE:DBKGn) investor conference, Marianne Lake – the chief financial officer at JPMorgan Chase & Co. (NYSE:JPM) – stated that the company’s trading business for the first two months of the second quarter has been down roughly 15%, year over year. Specifically, lower fixed income trading weighed on the overall trading income, while equities were up marginally.

In a separate conference call, held by Sanford Bernstein, Bank of America Corporation’s (NYSE:C) chief executive – Brian T. Moynihan – warned investors that the bank’s earnings in the second quarter will be hit by decline in trading income (down 10–12% from the prior-year quarter).

Further, Morgan Stanley’s (NYSE:MS) CEO James Gorman and Goldman’s Co-President David Solomon hinted the same view.

Last year’s trading results were quite unusual across the industry, with unexpected political developments in the U.S. and worldwide being the main drivers. The momentum continued in first-quarter 2017 too. However, banks are expecting weak trading revenues in the second quarter.

An improving economic backdrop and optimism surrounding the interest rate hike are supporting banks’ financials. Furthermore, the recently approved Financial Choice Act to eradicate a number of core financial regulations will act as a tailwind for banks in the coming quarters.

Though banks are expected to remain under pressure due to lackluster fixed-income trading activities in the near term, cost containment efforts are noticeable.

Currently, Citigroup carries a Zack Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Citigroup gained 6.1% over the past three months, outperforming 3.4% decline registered by the Zacks categorized Regional Banks-Major industry.

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