Customers use ATMs at a Citibank branch in New York, on Oct. 11, 2020.NICK ZIEMINSKI/Reuters
Citigroup’s C-N profit rose in the second quarter, boosted by a 60 per cent jump in investment banking revenue and gains in its services division.
Net income climbed to $3.2-billion, or $1.52 per share, in the three months ended June 30, the third largest U.S. lender said on Friday. That compares with $2.9-billion, or $1.33 per share, a year earlier.
The results come two days after U.S. regulators fined Citi $136-million for making “insufficient progress” in fixing data management problems identified in 2020. Regulators also required the lender to demonstrate it was putting enough resources toward those efforts.
Citi had already booked the penalties and additional investments on the data work in the second quarter.
CEO Jane Fraser is carrying out a sweeping overhaul in an effort to improve the bank’s performance, cut costs and simplify its sprawling businesses. As part of the turnaround, Citi aims to shrink its workforce by 20,000 over the next two years.
Revenue in the second quarter came in at $20.1-billion, up 4 per cent from a year earlier, buoyed by a $400-million gain from the conversion and partial sale of Visa stock in May.
Citi now breaks out earnings individually for its five businesses – services, markets, banking, U.S. personal banking and wealth, which were previously housed under broader divisions.
The new structure is part of Fraser’s efforts to cut bureaucracy and increase profits. Under it, the leaders of the segments report directly to the CEO.
Investment banking fees jumped 60 per cent in the second quarter to $853-million. The surge comes as a prolonged industry-wide slump in deals finally shows signs of a meaningful recovery.
Citi hired JPMorgan Chase veteran Viswas Raghavan as head of banking earlier this year. Fraser has expressed high hopes for Raghavan, who is tasked with revitalizing the division catering to multinational corporations.
Services revenue increased 3 per cent to $4.7-billion. The unit houses Citi’s treasury and trade solutions business, which the company touts as its crown jewel. The business had flat revenue this quarter, at $3.4-billion. It processes $5-trillion of payments a day for multinational corporations across 180 countries.
Fraser and other leaders highlighted their strategy for the services business at an investor day held at the bank’s New York headquarters last month.
Operating expenses fell 2 per cent to $13.4-billion, as the bank saved money from the reorganization that simplified its structure.
But the lower expenses were offset by the fines for failing to comply with regulatory punishments known as consent orders dating back to 2020, and investments for the remediation work.
Rival JPMorgan Chase JPM-N reported a rise in second quarter profit on Friday, while Wells Fargo’s WFC-N net income declined and it missed estimates for interest income.
Analysts have called 2024 a transitional year for Citi as it becomes leaner under Fraser’s turnaround.
Investors have also cheered the efforts and rewarded Fraser with a 28 per cent jump in the bank’s stock this year, far outperforming closest rivals JPMorgan Chase and Bank of America , as well as the broader equity markets.
Still, Citi has recently faced regulatory challenges tied to its so-called living will, which details how it would be unwound in the event of bankruptcy.
Citi is also working through two 2020 consent orders, in which the U.S. Federal Reserve and the Office of the Comptroller of the Currency directed it to fix longstanding and widespread deficiencies in its risk management, data governance and internal controls.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
TORONTO — Canada’s investment product regulator says it imposed more than $14 million in fines and other financial enforcements in its last fiscal year.
The Canadian Investment Regulatory Organization (CIRO) says the total also includes imposed costs and the forced return of ill-gotten profits.
The regulator says it also ordered suspensions and permanent prohibitions in a significant proportion of proceedings against individuals.
Enforcement efforts included a $2 million fine against Fortrade Canada for recommending a high-risk product to unsophisticated retail clients, and a $1.7 million fine and permanent ban on securities-related business against Paul Walker for a range of misconduct including soliciting more than $1.5 million in investments for an outside business activity.
CIRO was created at the start of 2023 through a combination of the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada.
The new self-regulatory organization says it is focused on harmonizing its regulatory approach to create more consistency and timeliness with enforcement action.
This report by The Canadian Press was first published July 16, 2024.
