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updated: 9/23/2013 11:12 AM

Citigroup drops after report bond-trading revenue to decline

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Bloomberg News

Citigroup Inc. fell the most since June, the fourth-worst performance in the Standard & Poor's 500 Index, after a newspaper reported that the bank's third-quarter bond-trading revenue slumped.

The lender fell 3.1 percent to $49.63 at 11:13 a.m. in New York. Citigroup's interest-rate and currencies business may lead a drop in overall bond-trading revenue at the company, the Financial Times reported, citing people familiar with the firm's talks with investors.

Global investment banks have seen a slowdown in debt trading amid uncertainty about the Federal Reserve's plans to reduce monthly bond-buying. JPMorgan Chase & Co., the biggest U.S. bank, and Barclays Plc told investors third-quarter trading revenue will probably drop from a year earlier. Jefferies Group LLC said last week that fixed-income trading revenue plunged 88 percent in its fiscal quarter ended Aug. 31.

"We model for Citi's FICC trading revenue to decline 25 percent," John McDonald, a Sanford C. Bernstein & Co. analyst, wrote in a Sept. 20 report, referring to fixed-income, currency and commodities trading. Citigroup, based in New York, is the third-biggest U.S. bank by assets.

The decline may be mitigated by a 29 percent increase in equity trading, McDonald wrote. He cut his estimate for third- quarter earnings by 16 percent to $1.01 on weaker capital markets and mortgage revenue. McDonald has an outperform rating on the stock.

Estimate Lowered

Atlantic Equities LLP's Richard Staite, who assigns an overweight rating to the shares, cut his estimate for third- quarter earnings by 14 percent to $1.05, citing a 20 percent decline in fixed-income trading revenue at the biggest U.S. banks.

Some investors expect revenue to fall by more than 10 percent, the FT reported. Mark Costiglio, a bank spokesman, declined to comment. Citigroup is scheduled to report results Oct. 15.

The shares rose 29 percent this year through Sept. 20, outpacing the 20 percent advance for the Standard & Poor's 500 Index.

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