Citigroup could post lower Q3 earnings, trading revenue slows

Citigroup suffered a significant decline in trading revenues that threatens to decrease its earnings, according to people familiar with conversations between investors and the bank in recent days.

People familiar with Citis discussions with its investors said the bank had highlighted a market-wide slowdown in activity. Some investors believe revenues will fall by significantly more than 10%. Citi has declined to comment.

Analysts reminded the banks business is particularly weighted towards interest rates and foreign exchange, which are seen as weak across Wall Street. It also has the biggest exposure of any U.S. bank to emerging markets that have seen capital flight and falling currencies in recent months.

Citi is due to report third quarter earnings on October 15. Weaker results would represent a setback to Mr Corbats attempt to improve operating performance at the bank but they are not expected to be bad enough to threaten his profit targets for the year.

Citigroup declined to comment on the report. The company is due to announce its third-quarter earnings on October 15.

In the second quarter, Citigroup posted a 42% jump in profit as bond trading revenue gained and stronger home prices helped the bad mortgages on its books.

The third largest U.S. bank is getting its house in order after years of management problems forced it to seek three U.S. bailouts in 2008 and 2009. Current Chief Executive Michael Corbat and predecessor Vikram Pandit cut risk-taking in its trading businesses, hired selectively in safer areas like investment banking, and scaled back in markets where the bank had few growth opportunities.

An executive at a large bank anonymously said hopes for a late flurry of activity had been dashed when the Federal Reserve opted to stick with its interest rate policy. He had hoped that the expected Fed “tapering” of its bond purchases would prompt investors to re-position their portfolios for a new interest rate environment.

However, CNN Money forecast shows the current consensus among 30 polled investment analysts is to buy stock in Citigroup Inc. This rating has been unchanged for more than 8 months. Citigroup share price rose almost 30% year-to-date.