After JPMorgan Chase & Co. JPM, another banking giant – Citigroup Inc. C has come up with the move of keeping the 2015-end bonus pool for its traders almost unchanged from 2014, per a Bloomberg report. The decision comes even after elevated compliance costs and new regulations in the banking sector, which is likely to put strain on the bank’s weakened peers.
Though Citigroup may change its plans depending on the trading performance in December, senior managers of the bank were informed about the initial decision. Notably, the bank’s Institutional Clients Group division, which includes trading and investment banking businesses, constituted 27% of the total revenue as of Sep 30, 2015, lower than 29% recorded in September 2014. Moreover, the division recorded 2.4% year-over-year increase in revenues for the nine months ended September 2015.
However, with a similar plan of keeping bonus pool unchanged last year, Citigroup reduced total pay for fixed-income and equities traders and salespeople, following weak performance in December 2014.
While UK-based Barclays PLC BCS may not award bonuses this year to some of its bankers, Citigroup’s European counterparts, including Deutsche Bank AG (DB), are also looking to reduce payouts. Also, Switzerland-based Credit Suisse Group AG CS might need to slash management bonuses by 60% as regulatory pressure continues to limit the company’s flexibility.
Amid the declining bonus pool across banks, Citigroup’s decision to keep the pool unchanged will strengthen its position among peers. However, weak trading activities primarily led to a sequential decline in the overall profit for Citigroup in its latest earnings results.
Though Citigroup’s weaker trading revenues continue to strain its top line, the company is focused on expense management. Moreover, the company is working on several areas including repositioning and restructuring initiatives, capital plan and legal issues and aims to achieve its long-term targets.
Currently, Citigroup carries a Zacks Rank #3 (Hold).
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