Citi warns of rocky first quarter amid federal probes
Citigroup has a had tough week. With pressure mounting from multiple fraud investigations in Mexico, the U.S. bank is now warning investors of what is shaping up to be a sluggish first quarter.
The drama began on Friday when the bank disclosed that its Mexican unit lost $400 million in a fraudulent loan scam, a crime that may have involved at least one Citi employee. The bank was forced to lower its 2013 figures as a result. Then, in what appears to be a separate matter, Citi acknowledged that the same affiliate has become the target of a federal money-laundering probe.
To top it off, Citi issued some mildly depressing predictions for the first quarter. Revenue is likely to be down across the firm’s consumer banking, trading and investment banking businesses, with fixed income again being the main culprit, chief financial officer John Gerspach told investors. Compared to a year ago, trading revenue will be down somewhere in the "high mid-teens" in terms of percentage, he said.
The situation doesn’t sound quite as dire for Citi’s consumer and investment banking units, which will each see slight dips due to seasonal issues and a surge of M&A deals being completed at the very end of 2013, Gerspach said.
Citi can at least take solace in the fact that it’s not alone when it comes to trading slumps. J.P. Morgan, the bank’s chief fixed income rival, said it expects to suffer roughly a 15% drop in trading during Q1. It’s likely other banks are in a similar position, albeit without the current mess that is Citi’s Mexican banking unit, Banamex.
After completing two big acquisitions, U.S. investment bank Cantor Fitzgerald is set to add asset and wealth managers.
KKR co-founders Henry Kravis and George Roberts must be embarrassed with their combined take-home pay of $327 million for 2013. Rival Leon Black, co-founder of private equity firm Apollo Global Management, earned more than $546 million last year. Blackstone Group founder and CEO Steven Schwarzman earned nearly $375 million.
Bankers, no matter where they are located, want to work for U.S. firms. Their first choice is always a U.S. bank, their second choice is a Canadian bank, their third choice is anything non-European.
Banks are moving more to electronic trading for the ease, but also the piece of mind knowing sketchy human beings aren’t colluding with each other. “If I have a business that is 100% electronic I am a lot less nervous about conduct,” said one anonymous head of trading.
Bond fund Pimco suffered $1.6 billion in redemptions in February. The bad news is that it’s good news. The figure represents Pimco’s lowest monthly net redemption total since May 2013.
BlueCrest has poached another portfolio manager from SAC Capital. Brian Younger, who had $600 million in buying power at SAC, will join BlueCrest’s New York office toward the end of the month.
With bulge-bracket banks shrinking their broker-dealer units, State Street is moving in. The Boston firm is looking to establish itself as a major corporate bond broker.
Buzz Around the Office
A fake chef with no culinary knowledge whatsoever conned his way on to five morning shows in the Midwest to promote his fake cookbook. He made the hosts concoctions like mashed potato ice cream cones with corn sprinkles and a ham, pie and gravy smoothie.
Quote of the Day: "I like cash. And one reason I like cash is because I get paid $350,000 a year to work at Blackstone, so I'm a relatively low-paid employee here." –CEO Steven Schwarzman, who made $375 million last year when including dividends.