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Fixed Income Drops at Some Big Banks, but Who’s to Blame?


Bank executives may want to blame an uncertain economic climate for steep drops in fixed income, but some analysts are questioning that rationale.

At Citigroup, fixed-income revenue was down 15 percent, to $2.3 billion, from the period a year earlier, and off 16 percent from the previous quarter.

Citigroup offered a range of explanations for the slowdown. Its chief executive, Michael Corbat, cited a trading environment, complicated by the lingering effects of the government shut down.

Citi’s chief financial officer, John Gerspach, said a decline in “client activity” was behind the fall. The bank said that the Volcker Rule also played a role because it required the bank to spin of some of its proprietary hedge fund and private equity businesses which had previously contributed to fixed income revenue.

Mike Mayo, a CLSA banking analyst, was skeptical.

“I am not buying that the environment is tough,’’ he said. “Citigroup executed poorly in trading.”

The fact that Bank of America said its trading revenue surged in the fourth quarter also had some analysts scratching their heads. BofA said the economic mood helped its results, while Citi said the end of the Fed’s bond-buying program hurt, noted Kayla Tausche, a correspondent for CNBC, in a Twitter post.

Publicly, Citi officials shrugged off the problem as a quarterly phenomenon that didn’t require any major fixes. But Mr. Mayo expected some big shake-ups. “Internally, I can’t believe it will be business as usual across Citi’s trading desks,” he said.

Goldman’s fixed-income revenue also declined 15 percent from the period a year earlier, to to $1.72 billion in the fourth quarter.

That’s still better than the firm’s third-quarter performance, when fixed income plummeted 44 percent, its lowest decline since the height of the financial crisis at the end of 2008.

But Goldman, the trading wizard of Wall Street, isn’t backing off fixed income any time soon. The bank plans to remain committed to the division, which generated nearly half of all revenue just a few years ago.

That stands in stark contrast to other firms like Morgan Stanley, which have cut trading in favor of what they see as more stable operations, like wealth management.