Boston, MA 01/30/2014 (wallstreetpr) – Citigroup Inc (NYSE:C) is just but one of the major banks that have seen a massive drop in their fixed incomes in the last one year. Most of these banks blame the uncertain economic situation in the US, and around the globe, for this turn of events. However, the question analysts are asking is whether the prevailing economic condition is the only factor worth blaming for this latest development. Citigroup saw its fixed income revenue drop by a whooping 15 percent to settle at $2.3 billion, compared to a year earlier, and 16% compared to the third quarter of 2013.
Citigroup’s top executives say that the drop in fixed income was the result of the US government shutdown that occurred towards the end of 2013.The company says that the shutdown messed up the trading environment, thus, making it impossible for banks to witness real growth in fixed income. Some of the bank’s top officials say that this drop in fixed income is attributable to declining client activities during the fourth quarter of 2013. The Volcker Rule has also been blamed for the negative growth that Citigroup, and other banks, witnessed during this period.
Citi is not overly worried with the lack of growth on fixed income. It says that this problem is one that occurred purely during the fourth quarter of 2013, and has very little chance, if any, of repeating itself. Because of this, Citigroup believes that this temporary situation does not need major fixing, to rectify it and ensure that the bank’s fixed income will grow instead of dwindling. That is what Citi is saying publicly. However, internally, the bank is putting up new measures to ensure that such a situation does not rear its ugly head again any time soon.
Goldman did not fare any better than Citigroup during the same period. It reported that its fixed income in the fourth quarter dropped by 15 percent, which is similar to Citigroup’s, to settle at $1.72 billion. However, the amount of money that Goldman lost in fixed income during the fourth quarter is much better than what it reported for the third quarter, when this part of its business fell by a high of 44 percent, the highest ever since the end of the 2008 financial crisis. This means that most banks in the US have to contend with falling fixed incomes.
As to what Citigroup will do now that it has posted losses where fixed income is concerned, that remains to be seen. It is unclear whether the bank will opt to get rid of this division, or continue in it, as Goldman announced that it will do. Goldman believes that fixed income still has great potential, being that it was responsible for more than 50 percent of the revenues it raised only a few years ago. Although the situation between the two banks is different, it is hard to say with certainty that Citigroup will forego this part of its business and do what Morgan Stanley did.
