Citi capitalises on investment banking rebound as Jane Fraser’s overhaul in focus

Citi outperformed expectations in the second quarter as the bank was lifted by a strong investment banking performance and lower costs.

Net income at the Wall Street giant was $3.2bn in the second quarter, up 10 per cent year-on-year with the bank seeing both higher revenue and lower costs.

Revenue increased four per cent on last year with growth across all business lines. Investment banking performed particularly well, with income rising 60 per cent compared to last year.

Citi’s debt capital division benefited from strong issuance activity in investment-grade assets while its equity business was also boosted by an increase in IPO activity.

Investment banking has been a sore spot for major banks for a couple of years, as high interest rates and economic uncertainty have caused a dearth of IPOs and dealmaking.

JP Morgan also published results today which showed that revenue from its investment banking division was up 50 per cent on last year, suggesting a broader recovery for Wall Street’s rainmakers.

Costs at Citi were two per cent lower which the bank attributed to savings “associated with Citi’s organisational simplification”.

Jane Fraser, Citi’s Scottish boss, announced the restructuring last September, confirming that a layer of leadership would be removed to give her more direct control over the business. In its investor presentation, the bank said it expects a headcount reduction of 7,000 helping to generate annualised savings of $1.5bn.

“Our results show the progress we are making in executing our strategy and the benefit of our diversified business model,” Fraser said in a statement accompanying the results.

However, costs for the year are still likely to be at the higher end of expectations as it has struggled with regulatory failures. The bank agreed to pay $136m for making “insufficient progress” on solving data management issues.

Shares rose just under three per cent in pre-market trading.

Wells Fargo also released results for the second quarter today, reporting a slight decrease in net income compared to last year.

The bank’s net income in the three months to June was $4.91bn, down from $4.94bn in the same period last year and below expectations.

Revenue was marginally higher than last year, but costs also rose on the back of higher spending on technology and revenue-related compensation in wealth and investment management.

Shares in the bank fell as much as six per cent before the opening bell.