Revenue from trading fixed-income products increased 18% to $3.37 billion, excluding accounting adjustments, driven by growth in “all major products,” Citigroup said. The figure fell short of estimates from Orenbuch and Staite.
Federal Reserve Chairman Ben S. Bernanke’s comments on May 22 that the central bank could ease up on a bond-buying stimulus program sparked selling of riskier debts. The policy, known as quantitative easing, had encouraged investors to seek out assets with higher yields. Trading volume for both investment-grade and junk bonds increased from the same quarter last year, according to data from the Financial Industry Regulatory Authority.
“Citi should have benefited from the volatility caused by the tapering debate,” Staite said before earnings were released. “Trading volumes have been good and I suspect bid- offer spreads widened. Citigroup has strong currency and emerging-markets businesses, ‘‘and should be a natural beneficiary,’’ Staite said.
Emerging-market assets plunged last month after Bernanke’s comments. Jamie Dimon, Corbat’s counterpart at JPMorgan, praised his firm’s handling of the slump and cautioned that other banks may have suffered.
Chief Financial Officer John Gerspach told reporters on a conference call that the lender did a ‘‘very good job of managing our business” in emerging markets. Citigroup’s currency-trading operation that deals in overseas markets was one of the bank’s “key performance businesses,” improving revenue from last year and from the previous quarter, Gerspach said.
Anil Prasad runs the currency-trading unit. Other executives at Citigroup’s fixed-income division include credit- trading boss Carey Lathrop, head of interest-rates trading Andy Morton and Howard Marsh, who leads municipal-bond trading. Jeffrey Perlowitz and Mark Tsesarsky are co-heads of trading of securitized products.
Revenue from fixed-income trading at JPMorgan jumped 17% to $4.08 billion from a year earlier, the New York-based lender said last week.
Profit at Citigroup’s consumer-banking unit slid 1% to $1.95 billion. The unit released $228 million from reserves previously set aside to cover losses on bad loans, compared with a $753 million release for the same quarter last year.
Citigroup co-President Manuel Medina-Mora runs the consumer bank, which operates about 4,000 branches across almost 40 countries. Corbat and Medina-Mora are selling and scaling back consumer operations in some emerging markets, including Turkey and Uruguay, as part of a plan to cut costs that includes firing 11,000 workers.
The bank employed 253,000 as of June 30, 3% fewer than a year earlier.
Fees from investment banking, which includes managing bond and share sales for clients and providing advice on mergers and acquisitions, climbed 21% to $1.04 billion, exceeding the $888 million predicted by Orenbuch. Raymond J. McGuire and Tyler Dickson oversee the unit in New York.