(Oct 13): Citigroup Inc’s fixed-income traders handed in their best third quarter (3Q) in at least a decade, beating analysts’ expectations and sending the bank’s revenue for the period to one of its highest levels ever.

Desks handling bonds, currencies and commodities reeled in US$4.4 billion (RM17.96 billion), topping the US$4.3 billion average of analyst expectations, according to a statement on Tuesday. That accompanied a standout quarter for its services business, which helps companies and governments move and manage their money and saw revenue rise 15% on last year to US$6.6 billion.

The better-than-expected results from FICC trading and services helped offset a more sluggish quarter from Citi’s business advising clients on mergers and acquisitions, where revenue declined 4%. Revenue from debt underwriting slipped, too.

Shares edged lower in premarket trading on Tuesday, falling 0.4% as of 8.30am New York time. 

Shareholders are watching fixed-income trading desks closely for signs that one of the industry’s biggest profit engines may start to stall amid rising interest rates and a slowdown in mergers and acquisitions. Citi’s fixed-income franchise is Wall Street’s second largest, making it an especially important part of the firm’s broader markets lineup, in which results from some other units were mixed.

So far, the bank seems to be navigating that turmoil better than its rivals. JPMorgan Chase & Co reported earlier on Tuesday a surprise drop in fixed-income trading revenue in 3Q, the first such decline in more than two years. At Citi, the results were led by gains in its credit financing desks within its spread products unit, while rates trading revenue declined.

Chief executive officer Jane Fraser has been pushing the New York-based bank to eke out better returns, making the case to investors that it can increase revenue, keep a tight hold on expenses and narrow the gap with Wall Street peers after years of stagnation. The bank’s shares are up 13% this year, more than all of its major rivals.

Citi reported earnings per share of US$2.85, surpassing the US$2.65 average estimate from analysts tracked by Bloomberg. Revenue rose about 8% to US$23.8 billion, outpacing the US$23.7 billion average estimate.

The bank has been targeting a 10% to 11% return this year to bring profitability closer to peers. Return on tangible common equity amounted to 12.6% in the first nine months. In September, finance chief Gonzalo Luchetti told investors the bank was on track to surpass the 11% figure for the year.

The bank spooked some investors in July, saying it would pull forward some expenses through deeper job cuts and technology investments in the latter half of the year. But the firm was able to keep a lid on costs in 3Q with non-interest expenses totalling US$14 billion. Analysts estimated US$14.4 billion.

Citi is also preparing for a public listing of Banamex, its Mexican consumer-banking business. The firm has lined up banks to advise on the offering in the coming months, when it will offload much of its stake as the tail end of a yearslong strategy under Fraser to downsize retail business outside of the US.

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