“Capital markets will remain a key driver of 2Q results,” writes Deutsche Bank analyst Matt O’Connor.
“Trading revenue will likely be meaningfully weaker q/q (down 40-45% q/q and down 10- 15% y/y), driven by weaker fixed income, currencies, and commodities trading (we est. down 45-50% q/q and -15% y/y). We expect investment banking fees to be down 10% q/q and down 25-30% y/y vs. strong levels a year ago. For equity trading, we assume a 10-20% q/q decline (and down 5-10% y/y).”
O’Connor expects increased borrowing activity in the U.S. and abroad to be a plus for the bank.
“Core loan growth (i.e. at Citicorp) should continue to rise at a steady pace (we est. +2- 3% q/q un-annualized—same as 1Q), and likely through a combination of corporate loan growth (+2% q/q un-annualized), seasonally higher US credit card balances (+1.5% q/q), and from non-US retail banking (+1.4% q/q)—mainly Asia and Latin America.”
Unlike some of the other big banks, Citi has enviably been out of the headlines lately. Nevertheless, it is likely to have to address concerns regarding LIBOR (thanks to Barclays) and proprietary trading activities (thanks to JP Morgan).
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