Citi is trumpeting its external hires amidst mixed messages on bonuses
It's a bumper day for US bank results: JPMorgan, Goldman Sachs and Citi have all announced their fourth quarter results today. Bonus news will follow soon: Goldman is telling employees their bonuses between today and Friday, Citi is announcing tomorrow, JPMorgan is announcing on the 22nd.
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Of all the banks, the big question is what happens to bonuses at Citi. Citi CEO Jane Fraser said today that she's delaying her 2022 target of hitting a 12% return on equity by 2026. Instead, she's aiming for 10-11% by the end of next year.
This isn't great, given that Goldman Sachs and JPMorgan today disclosed returns of 13.5% and 18% respectively for 2024. In Citi's markets and banking divisions, the return on equity was 9.1% and 7% by comparison.
Citi is adamant that things are going well. Today's presentation stresses that the bank has been investing in "front office talent" and has "new banking leadership." It also states specifically that "external hires now account for 40% of business heads."
This is a contentious point following the arrivals of Vis Raghavan and Achintya Mangla from JPMorgan to lead the investment bank, and of Andy Sieg from Merrill Lynch as the head of wealth. Citi lifers have been leaving following the external hires. Retention bonuses have been necessary in Sieg's team. The presentation suggests Citi is fine with this.
Today's results also suggest that Citi's bonuses may not be that great when they're announced tomorrow. Citi doesn't disclose divisional compensation spending, but its operating expenses were down 8% year-on-year in the markets business and by 9% year-on-year in banking. Citi said today that this was due to "productivity savings" and to actions taken to "right-size the expense base." Citi is in the process of cutting 20,000 jobs, and last year stripped five of its 13 layers of senior managers.
There are some promising signs, though. Citi also said today that "incentive compensation" will be tied to revenue growth. Excluding gains on hedges, banking revenues were up 24% last year; markets revenues were up 6%.
Citi's equities traders and its M&A and debt capital markets bankers can probably be optimistic. Citi's fixed income currencies and commodities (FICC) traders may well be disappointed. Macro traders are to blame: credit trading revenues at Citi rose by 20% year-on-year in 2024; rates and FX revenues fell 6%.
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