During an investor conference held recently, Citigroup’s (NYSE:C) CFO Mark Mason provided a disappointing update on the company’s second-quarter results. He highlighted that Citigroup’s performance has been negatively impacted by a continuous slowdown in dealmaking, which can be attributed to factors such as rising interest rates, high inflation, and other macro uncertainties.
Mason said that trading revenues are projected to decrease by 20% year-over-year. This decline can be attributed to the impact of U.S. debt-ceiling talks, which significantly affected client activity throughout most of the quarter. Additionally, he revealed that investment banking revenue has dropped by 25% thus far in the second quarter, aligning with industry trends. However, the only silver lining in Mason’s comments was the improvement in debt capital markets activity.
Additionally, Citi’s second-quarter expenses are expected to be $300-$400 million higher on a sequential basis. This is due to the negative impact of severance costs related to 1,600 job cuts and other restructuring expenses.
Furthermore, the company disclosed plans to reduce its headcount by 5,000 positions by June-end. The majority of these cuts are likely to be in the multinational financial services provider’s investment banking and trading units.
It is worth mentioning that Goldman Sachs (GS) is also undertaking a fresh round of reductions, which would affect about 15 dealmakers. Further, Morgan Stanley (MS) is planning to cut 7% of its Asia-Pacific investment banking workforce, with the maximum number of layoffs in China.
Is Citi a Buy or Sell?
Based on the ratings of the 11 top Wall Street analysts, Citigroup has a Moderate Buy consensus rating based on four Buys, six Holds, and one Sell. C stock’s average price target is $56.21, suggesting 16.5% upside potential from the current level. It is noteworthy that these top analysts have an impressive history of helping investors generate massive returns from their recommendations.
