Citigroup is the latest investment bank to report its Q3 results and, as expected, the performance of its fixed income division was as torrid as other firms' – dragging underlying profits in its securities and banking division down by 29% to $1.2bn from this time last year.
However, the EMEA region performed particularly badly – ‘clean’ profits, namely stripped of the debt-value adjustments (or how the firm handles its own debt) dropped from $562m in the third quarter of 2012 for the region, to $245m today – a decline of 56%.
Meanwhile, its North American division was comparatively resilient, posting profits of $508m, which were broadly in line with last year.
And yet the third quarter was one of expansion for Citigroup’s securities and banking division in London. 108 people have been hired since June, according to the Financial Conduct Authority register, suggesting that it’s been investing in front office staff.
Some of this can be pinned on the intake of new investment banking analysts in September, but it’s also been building its commodities business, as well as recruiting for its structured products and derivatives division in London.
Nonetheless, overall headcount has been declining – operating expenses in its securities and banking division fell by 3% on the previous year to $3.4bn, which it says is reflective of “headcount reductions and lower performance-based compensation”.
Still, relative to earnings, it seems that Citigroup need to do more to cut costs. Expenses in the investment bank amounted to 71% of revenues in the third quarter of 2013, up from 51% in the first and second quarters of this year.