The spike in volatility weighed on trading desks dealing in interest rates, currencies and bonds over the fourth quarter as it became harder for banks to commit capital to clients – currency and rates trading plunged 26% year-over-year at Citigroup. Furthermore, traders stepped away fro markets toward the end of 2018 while low-cost algorithms took over.
Citigroup Lending Increases
On the upside, lending increased 3% year-over-year at Citigroup, and the bank improved the net interest income it generated even while savers sought out higher deposit rates. It also cut down its lending losses from the previous year.
“We clearly see a disconnect between what we see in our business on an anecdotal basis and what the markets are saying,” Citigroup Chief Executive Michael Corbat told analysts on Monday. “Right now, we see the biggest risk in the global economy is one of talking ourselves into the next recession, as opposed to the underlying fundamentals taking us there.”
Looking ahead, financial sector investors will be closely watching a potentially tough earnings season for Wall Street as J.P. Morgan Cahse & Co (NYSE: JPM) reports fourth quarter earnings on Tuesday and Bank of America (NYSE: BAC) reports on Wednesday. XLF includes a 11.5% tilt toward JPM and 8.2% to BAC.
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