Abysmal First Half Prompts More Banks to Cut Jobs

Citigroup is the latest prime broker to reduce the number of traders on its payroll, FX once again spared

After Deutsche Bank recently announced major cuts to its trading desks, particularly in equities, Citigroup has become the latest big financial institution to begin cutting back on trading desk talent. According to Bloomberg, hundreds of jobs in the company’s trading division are on the line.

The cutbacks are going to be primarily focused on equities and fixed income, with the foreign exchange desk being once again spared just as it was at Deutsche Bank a couple of weeks ago. The trading revenue decline in the first half of the year is the main reason for Citigroup’s move, sources shared with Bloomberg.

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Sharp market moves in the first half of the year have been few, save for the May slump, which couldn’t come as a big surprise as the age-old adagio of ‘sell in May and go away’ still holds. The main reason for the slump in trading, however, could be a protracted period of uncertainty around trade, and the ongoing shift in the monetary policy direction on the part of the US Fed.

Many banks have been affected by the challenging market conditions amid prevailing uncertainty and lackluster trading activity changing hands with pockets of volatility.

More to Come?

Aside from Deutsche Bank earlier this month, another big European lender has been cutting back on banking jobs. Unicredit has been considering radical cutbacks on trading desks due to the company’s challenging financial position.

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The largest lenders in Germany and Italy remain a risky investment despite recent job cuts. The firms have been pressured to reign in their finances at a time when the European Central Bank’s negative interest rates policy has squeezed profitability for banks in the region.

Two other European lenders are cutting back on trading personnel with Societe Generale and HSBC announcing earlier this year that they are streamlining costs.

According to publicly reported data, trading revenues of the five biggest US lenders declined by eight percent. The results mark a back-to-back quarterly decline after another slump of 14 percent in Q1.

Citigroup Cost Cutting

As Citigroup reported its earnings on July 15, the company committed to reduce its costs materially. As CEO Mike Corbat emphasized the company’s ongoing investments into technology won’t be affected, cutting on jobs is the main focus.

Revenues from equities trading declined by 17 percent in the first half of 2019, making the company’s efforts to optimize costs essential for competitiveness. With only $1.6 billion for the first six months of the year, the company is trailing behind all of its US peers.

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