Citigroup (C) Projects Trading Revenue To Improve In Q3

Keeping alive the optimism related to growth in trading income, Citigroup Inc. (NYSE:C) expects to see a mid-single digit rise in trading revenues in third-quarter 2016 on a year-over-year basis. The growth will be driven by strength in fixed income and currencies.

This was declared by Citigroup’s Chief Financial Officer – John Gerspach – at an investors’ conference in New York, sponsored by Barclays (LON:BARC) PLC (BCS). Gerspach said, “…market revenues are performing above our expectations for the third quarter.”

However, trading income will be down on a sequential basis. Notably, Citigroup had reported a significant rise in the same in the second quarter fueled by Brexit-induced uncertainty in June end.

Further, Gerspach stated, “…investment banking is a little lighter than we had estimated, as M&A revenues should continue to recover sequentially, but not enough to offset the comparison to a very strong second quarter in debt capital markets.”

Earlier this week, at the same conference, Bank of America (NYSE:BAC) Corporation (NYSE:C) had announced an uptick in investment banking fees for the third quarter. Recovering oil prices and stabilizing market conditions are the primary reasons for the reversal in the investment banking scenario. (read more: BofA's Investment Banking Fees Trending Up In Q3)

Getting back to Citigroup, it reiterated the outlook related to Institutional Clients Group’s revenue, while estimating to incur mark-to-market losses on its loan hedges in the third quarter, giving spread tightening.

Moreover, Citigroup anticipates revenues to rise marginally, in consumer banking, in Asia and Mexico, leading to positive operating leverage. Further, the company continues to witness progress in “both North America cards and the international franchise”.

In addition, on Citigroup’s credit-card partnership with Costco Wholesale (NASDAQ:COST) Corporation (NYSE:C) Gerspach said, “…continues to exceed our expectations for customer engagement and new account acquisitions, and revenue trends are above our expectations on an organic basis, driven by strong volumes on our existing U.S. card portfolios.”

On the cost front, Citigroup now expects core expenses to be slightly higher from second-quarter 2016 in Citicorp. A rise is likely due to growth in cards and additional expenses resulting from the Costco conversion. Earlier, the company had guided costs to be marginally down.

Market revenue has been under strain since the last few years. Therefore, this positive outlook comes as a relief for the Wall Street banking giants.

Currently, Citigroup carries a Zacks Rank #3 (Hold). A better-ranked major regional bank is Comerica Inc. (NYSE:CMA) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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