What Citigroup's results say about where Citigroup's likely to hire

Yesterday it was Citigroup's turn to reveal how badly/well it performed in the fourth quarter. Today it is Goldman Sachs'.

There are big hopes for Citi's hiring intentions this year. Having reduced European headcount by 14% between 2007 and 2009 and sprayed senior M&A bankers across the market in 2010, it's widely expected to be one of the more dynamic recruiters of 2011.

So what can be deduced from yesterday's results and call?

1) Most of the hiring's already done

Much as it might be nice to think that Citi will do lots of hiring this year, CFO John Gerspach seemed to suggest otherwise yesterday.

Gerpsach said most of the bank's equities build out, "is now done," and that "most of the investment work in securities and banking is now behind us."

There was no mention of any additional hiring in European M&A.

2) But Citi's sales and trading operation still isn't looking great

Even though most of the 'investment work' is out of the way, the consequences of this investment have yet to make themselves felt.

In the fourth quarter, revenues in Citi's fixed income markets business were down 32% (excluding a charge for the changing value of its own debt). This compared to a reduction of just 8% at JPMorgan.

During the call, CEO Vikram Pandit admitted Citi needs to build out its equities and commodities businesses to counteract the volatility of fixed income, upon which it's over-reliant. Now that the investment's been made, the revenues need to follow.

3) The rates business has gone down the pan

Citigroup's rates bankers had an especially disastrous fourth quarter. Gerspach said rates alone accounted for two thirds of the quarterly decline in the bank's fixed income trading business. Bonuses will suffer as a result.

4) The real hiring this year will be in the corporate bank

Like JPMorgan, Citi's real focus appears to be building its corporate banking business. Gerspach said the corporate banking franchise is an area where there's still, 'work to do'.

5) Expenses are high, don't expect big hiring early in the year

Like JPMorgan, Citi's got issues with non-compensation expenses. The bank doesn't break out pay in its investment banking operations, but the profitability of its securities and banking unit fell 30% year on year in 2010.

Across the bank as a whole, expenses were up 8% in the last quarter, exceeding analysts' expectations substantially.

Hardly any of this increase appears to have been attributable to increased compensation. Gerpach said $150m was down to FX changes, $400m was down to legal matters, $100m was down to severance and restructuring and $100m was down to 'investment and volume driven growth.'

With expenses high, Citi is unlikely to commit soon to big hiring. Gerspach said they will look to, "pace investments," and that, if anything, 2011 expenses will be, "a little back-end loaded."