Citi CFO expects investment banking fees to rise 20% in third quarter

By Tatiana Bautzer and Manya Saini

NEW YORK (Reuters) -Citigroup's investment banking fees are expected to jump 20% in the third quarter from a year earlier, Chief Financial Officer Mark Mason told investors at a conference in New York on Monday.

The gains are being driven by a good pickup in activity across debt capital markets and mergers and acquisitions, Mason said.

Meanwhile, markets revenue is likely to drop about 4%, he added, after a jump of 10% last year wasn't repeated in 2024.

The bank expects the U.S. economy to achieve a so-called soft landing if the Federal Reserve cuts interest rates as anticipated this year.

Clients are also weighing the impact of the U.S. presidential election in November and the potential economic policies of both candidates.

"There is a lot of discussion around the different policy views around different sectors, like energy, healthcare, consumer and what the result of an election might mean for those sectors," Mason said.

In Citi's consumer credit cards business, payment rates among customers are starting to decline, particularly for those who have lower credit scores, Mason said.

While credit card delinquencies have climbed, they are starting to crest, he said.

"There's a dichotomy, if you will, between the higher FICO score and the lower FICO score customers," with affluent customers increasing spending while lower-credit score customers switch their purchases to prioritize staples instead of discretionary items.

CONSENT ORDERS

Citi was fined $136 million by regulators in July for making insufficient progress on fixing data management issues from regulatory punishments dating back to 2020.

Regulators also required the lender to demonstrate it was putting enough resources toward those efforts.

The bank is giving special attention to data, "which was the area where we got the feedback that we weren't moving fast enough," Mason said in response to a question about the compliance work.

Citi is trying to improve the quality and speed of its data gathering, as well as standardization, he said.

The bank is executing a plan required by regulators to ensure it has the number of people needed to finish the work.

"We've already put in place a review of how we're proceeding against each of the initiatives" that were behind schedule, he said. The bank will analyze if more people are needed in areas where the work is delayed.

Citi's profit beat Wall Street expectations in the second quarter, lifted by revenue in investment banking, markets and services. Its shareholder returns stood at 7.2% during the period, short of its 11% to 12% medium-term target.

Citi shares were little changed on Monday afternoon. They have risen 15% so far this year, compared with a 19% gain for an S&P 500 index of broader bank shares.

(Reporting by Manya Saini and Tatiana Bautzer; editing by Lananh Nguyen)