Citi says trading revenue to drop by double digits this quarter

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A trader, center, wears a Citigroup jacket while working on the floor of the New York Stock Exchange (NYSE) in New York.

Citigroup CFO John Gerspach said trading revenue for the bank would be down by double digits this quarter.

“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 Morgan Stanley’s Financials Conference in New York today. “So given that…slower trading environment, we would expect revenues in our fixed income and equity markets to be down year-over-year in the I guess I’ll call it the low double digits range, maybe 12 to 13 percent”

The CFO was questioned on the near-term forecast for the bank’s trading revenues as other competitors have recently forecast a decline of double digits.

It was boom times for Citi and the rest of Wall Street in the first quarter as revenue for the bank from fixed income trading surged 19 percent and equity trading revenue increased 10 percent in the period. The inauguration of President Donald Trump and anticipation of his business-friendly agenda raised expectations for higher rates and more volatility.

Those things haven’t really come to pass. The 10-year Treasury yield is lower for 2017 and the CBOE Volatility Index has fallen to new multi-year lows as major equity benchmarks rose to records.

Markets have remained placid this quarter despite key elections in France and the U.K. and some setbacks for the economic agenda of President Trump, making it hard for Wall Street to make a buck.

“It’s sort of in sharp contrast as to what we saw last year. A lot of activity with the onset of Brexit and then just leading up to the US primary elections,” added Gerspach.

He added that this drop in trading was “just a little bit more than we otherwise would have anticipated given the environment.”

The CFO said the bank’s efficiency ratio will rise to 59 percent for the quarter and settle in at 58 percent for the full year.

Citigroup shares remained slightly in the green Tuesday despite Gerspach’s comments. The stock is up 8.9 percent this year, about even with the market.