What's going on?
On Monday, US banks Citigroup and Goldman Sachs spilled the beans on their respective first quarters – and both were a mixed bag.
What does this mean?
Goldman reported revenue below expectations across nearly all of its businesses – and profit down 20% on the year before, although that was better than expected. The bank’s falling revenue was partly down to lower trading activity among clients: markets were less volatile than a year ago, giving investors fewer reasons to chop and change their positions. But Goldman saved money by lowering staff compensation, and did brisk business advising companies on mergers and acquisitions: revenue there was up 51%.
Citi’s profit was also better than expected – and revenue also worse. It struggled with disappointing share trading activity too: revenue there fell 24%.
Why should I care?
For markets: Investors didn’t much like either bank.
The US Federal Reserve last year signed off on banks making bigger payouts to their investors, and some appear to be delivering. Goldman raised its dividend for the quarter by 6% – but that wasn’t enough to please shareholders, who sold its stock on Monday. They’re likely watching to see how Goldman’s new DJ CEO MCs a push into consumer banking – which includes “high”-interest savings accounts and Apple-native credit cards. Citigroup, meanwhile, continued to return money to investors last quarter by way of share buybacks, with fewer shares having the added bonus of boosting its profit per share remaining. According to TipRanks data, analysts generally recommend buying Citigroup shares at the moment – less so Goldman’s.
Zooming out: European banks have issues.
Germany’s Deutsche Bank and Commerzbank are busy figuring out a merger; Swiss UBS is slashing costs after a tough quarter; and Britain’s Barclays is fighting with shareholders. US banks may have benefited from the distraction and pinched some of their European cousins’ business, helping them exceed expectations despite an unfriendly environment. We’ll find out next week, when the big European banks report their own quarterly results…