Citigroup's Salomon Smith Barney Suffers Massive Bond Trading Losses

Strategic Insights -

Citigroup's recent merger has brought severe financial consequences, particularly in the bond trading division of its subsidiary, Salomon Smith Barney. The investment bank suffered a staggering $1.33 billion loss in just three months of this year, largely due to problems in the bond markets. This loss severely impacted Citigroup's revenue, causing a 65% drop in the third quarter. The failure of Salomon Smith Barney's bond arbitrage business, which was shut earlier this year, contributed to a $700 million loss, and the sacking of 100 bond traders last week further exacerbated the situation.

Key Takeaways:

  • Salomon Smith Barney suffered a $1.33 billion loss in bond trading over three months of this year, largely due to problems in the bond markets.
  • The loss led to a 65% drop in revenue for Citigroup in the third quarter.
  • The failed bond arbitrage business contributed to a $700 million loss, and the closure of the business was cited as a significant factor in the financial woes.
  • 100 bond traders, including 10 in London, were let go last week, while there are ongoing concerns about potential job cuts in the foreign exchange business.
  • Citigroup's retail business showed a 9% improvement, which was unable to offset the losses suffered by the bond trading division.
  • The failure of Salomon Smith Barney's bond trading business, combined with operational costs, led to a fall in operating profit to $729 million in the third quarter.
  • Had the merger between Citigroup and Travelers/Citibank been completed a year ago, profits would have been $2.1 billion.

Statistics:

  • $1.33 billion: Salomon Smith Barney's bond trading losses in three months of this year
  • 65%: Drop in Citigroup's revenue in the third quarter attributable to Salomon Smith Barney's bond trading losses
  • $700 million: Loss from the failed bond arbitrage business
  • 100: Number of bond traders sacked by Salomon Smith Barney last week
  • 10: Number of bond traders let go in London
  • 9%: Improvement in Citigroup's retail business
  • $729 million: Fall in operating profit for Citigroup in the third quarter
  • $2.1 billion: Projected profit for Citigroup if the merger had been completed a year ago

Sources:

"Jill Treanor, "Ructions at Salomon Smith Barney lead to 100 job losses", The Guardian.