Citigroup beats analysts’ estimates on investment banking

Express Scripts

Citigroup was among the lead advisers to Express Scripts Holding Co., the largest U.S. processor of drug prescriptions, on its $29.1 billion purchase of Medco Health Solutions Inc. on April 2.

Raymond J. McGuire runs Citigroup’s merger advisory business while Tyler Dickson oversees underwriting. Both report to Jamie Forese, head of the bank’s securities and banking division.

Revenue from trading stocks and bonds fell 9 percent excluding the accounting adjustment, to $3.37 billion, less than the $3.5 billion predicted by Moshe Orenbuch, an analyst at Credit Suisse Group AG. Trading revenue at JPMorgan declined 15 percent to $4.54 billion.

Fixed-income trading declined 4 percent to $2.82 billion, Citigroup said. The bank had gains in Anil Prasad’s currency- trading business and so-called rates, interest-rate products such as Treasuries, inflation-protected bonds and interest-rate swaps. Credit-trading, led by Carey Lathrop, and securitized products declined, the lender said, without giving more details.

Stock Trading

Revenue from trading shares fell 29 percent to $550 million. That compared with JPMorgan’s equity-trading revenue, which fell 9 percent to $1.04 billion for the same period.

Derek Bandeen runs equity-trading in London. Pandit overhauled the unit in January, shutting a so-called proprietary-trading unit and appointing new global heads of equity derivatives, cash equities and “Delta One” trading. The Delta One desk typically helps clients speculate on or hedge the performance of a group of securities.

Revenue at the bank’s global consumer-banking business was little changed at $9.77 billion. International revenue at the unit, which is run by Manuel Medina-Mora, fell 4 percent to $4.6 billion, reflecting the impact of foreign exchange, the bank said. Total profit fell 1 percent to $1.99 billion.

Citigroup may have taken a “hit” as currencies in some of its biggest markets declined against the U.S. dollar during the quarter, Charles Peabody, an analyst at Portales Partners LLC, said in June. The Mexican peso, Brazilian real and Indian rupee are among currencies that have weakened, which could lead to “value destruction” for the lender, said Peabody, who has a sell rating on Citigroup shares.

Consumer Banking

The consumer-banking unit also increased the amount of money set aside for future losses on loans outside North America by $86 million, Citigroup said. That contributed to a 12 percent drop in the division’s international profit to $795 million. Pandit told shareholders in a March 9 letter that the bank has an “intense focus on capturing emerging-market trade.”

Citigroup said last month it would retreat from an effort to win Federal Reserve approval to boost payouts to shareholders this year. Pandit had vowed in March to seek approval for a “meaningful” payout after the Fed objected to its initial submission for 2012.

Pandit scrapped Citigroup’s dividend in 2009 after the bank almost collapsed and took a $45 billion bailout from U.S. taxpayers. The lender has since repaid the rescue funds, and last year it resumed a 1-cent quarterly payment.

JPMorgan said last week that fees from advising on mergers and acquisitions tumbled 41 percent to $356 million. Debt- underwriting fees slid 26 percent to $639 million while revenue from handling share sales declined 45 percent to $250 million.

Wells Fargo & Co., the fourth-biggest lender, said last week that profit rose 17 percent to a record $4.62 billion on strength in new mortgage loans. Bank of America Corp., the second-biggest, will probably report a $1.97 billion profit July 18, according to the average estimate of 10 analysts surveyed by Bloomberg.

Bloomberg News

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