Goldman Sachs reports its third quarter results tomorrow, but there are already indications that all may not be going to plan: Reuters suggested yesterday that the firm might miss its targets for consumer banking and wealth management. Today's results from Citi help explain why.
Citi's third quarter (Q3) results reveal that the bank had a miserable quarter in consumer banking, where revenues declined 13% following 'lower card volumes and lower interest rates across all regions,' as a result of the COVID-19 pandemic.
By comparison, Citi's fixed income traders had their best quarter in eight years as revenues increased 18% year-on-year, driven by credit and commodities trading. Equities traders didn't do too badly either, with revenues rising 15%, driven by cash equities and derivatives, partially offset by a downturn in revenues from prime finance. Unlike JPMorgan, Citi appears to be intending to pay its traders. - Alongside higher spending on risk management and controls, the bank mentioned higher compensation spending in its quarterly presentation.
Citi's booming trading revenues and lackluster consumer banking revenues come just as Goldman Sachs attempts to pivot away from risky trading and focus more heavily on 'platform' businesses like its Marcus retail bank and its cash management platform. Coincidentally, Citi's Treasury and Trade solutions business, which includes its own market leading cash management platform, also underperformed in Q3.
The fact that a market leader like Citi is struggling to make these businesses work in the current environment might give Goldman pause for thought. It could also lead to some reflection at Citi, where the head of the retail bank, Jane Fraser, is set to become the new CEO.
Away from sales and trading, Citi and JPMorgan's third quarter results suggest a more mixed picture: it was a bad quarter for both in M&A, good in equity capital markets and so-so in debt capital markets.
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