EMEA and Latin American bankers at Citigroup are very profitable, Asian and American bankers aren't
Citigroup's first quarter results are out.
They aren't great. Overall, the bank made its fifth straight quarter of profit - but only because it released a massive $3.4bm of loan reserves, without which it would have made a loss.
It also didn't do massively well in its securities and investment bank. After allowing for changes in the value of its own debt, Citi's total securities and banking revenues were down 19% year on year in Q1.
Specifically:
- Advisory revenues were down 28%
- Equities underwriting revenues were down 9%
- Debt underwriting revenues were down 21%
- Equity markets revenues were down 12%
- Fixed income markets revenues were down 29%
Bank of America's results last week were better: it actually achieved a 24% increase in revenues across advisory and underwriting, although its FICC revenues were down 50%.
Citi's disappearing margin
Most interestingly, Citi's margins in securities and banking suggest investment banking isn't nearly as lucrative as it used to be.
While revenues fell 19% on Q1 2010, profits fell 46%, reducing the margin in the securities and banking business from 40% to 28%.
However, some parts of Citigroup's global investment banking empire are far more profitable than others.
Hence, margins in North America and Asia are only 20%. But in EMEA they're 37% and in Latin America they're 47%.
We consequently suggest Citi increases pay in EMEA and Latin America and reduces it in North America and Asia. Either that, or it finds some new revenues soon.
