Citigroup CFO Sees 5% Drop in Third-Quarter Trading Revenue

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Citigroup Inc. Chief Financial Officer John Gerspach said third-quarter trading revenue will decline from a year earlier amid increased volatility.

“We expect our underlying revenues for fixed-income and equity markets to be down in the range of about 5 percent,” Gerspach said Wednesday at an investor conference in New York.

Comparisons to 2014 were made difficult by last year’s strong September for the rates and currencies business, he said. Citigroup recorded $3.74 billion in revenue from trading stocks and bonds last year in the third quarter, with fixed-income contributing $2.98 billion and equities adding $763 million.

Swings in Chinese markets in August rattled investors worldwide as they struggled to anticipate policy actions in the world’s second-largest economy. The Chicago Board Options Exchange Volatility Index, the gauge of investor nervousness that rises with market stress, surged above 40 on Aug. 24, before falling below 23 Tuesday. The gauge was at about 12 at the end of July.

“So far in the third quarter, our markets franchise has navigated well through the volatility seen in the latter half of August with solid client activity,” Gerspach said. “We have seen a greater impact from the market volatility on industry underwriting activity.”

Citigroup brought in $6.55 billion from trading in fixed-income markets in the first six months of 2015, a 7 percent drop from last year’s first half. Equity-trading revenue fell 1 percent to $1.53 billion.