Citigroup, Goldman defend strategies

Citigroup Inc. and Goldman Sachs Group Inc. both delivered better-than-expected earnings. Instead of celebrating, executives spent Monday morning assuring investors they’ll make more progress on revamping units that are dragging down results.

Growth stalled at Citigroup’s consumer unit, so executives pointed to green shoots in a digital bank effort. Goldman Sachs had the biggest first-quarter trading decline among banks that have reported so far, and its executives highlighted efforts to refocus the unit on more electronic trades that require less capital.

Lower tax rates and a pair of surprise revenue jumps — bond trading for Citigroup and investment banking for Goldman Sachs — drove the profit beats. But the banks’ results did little to assuage concerns about businesses that have been under the spotlight over the past year.

There were signs analysts are getting restless. Asked on a conference call what was taking so long with a strategic review, Goldman chief executive david Solomon said the firm does have a sense of urgency, but needs to make sure the review is handled properly.

“We’re trying to balance the fact that you all want more, quicker,” said Solomon, who took over as CEO in October. “We understand that, but we’re going to make sure we do it in the highest-quality way we can.” The bank said results of the review probably wouldn’t be ready until the first quarter of next year.

Citigroup appeared to have more success in assuaging investors. Its shares almost erased a drop that was as much as 1.7 per cent earlier in the day, finishing down less than 0.1 per cent. Shares of Goldman slumped 3.8 per cent, the biggest decline this year and the worst performance in the S&P 500 Financials Index.

Goldman’s slump followed a drop in equity-trading revenue that was bigger than analysts expected and a warning from the firm that the investment-banking boost it got in the first quarter may not last.

The strategy review may result in a shift in “focus and footprint” in some areas of fixed income, Chief Financial Officer Stephen Scherr said on a conference call with analysts. He said the firm remains committed to commodities, where it’s been making cuts in response to sharp revenue declines.

For Citigroup, a bond trading bump was offset by a lack of growth in the consumer division. The New york-based bank has spent years expanding its credit-card offerings and retail-banking services, so the division’s slowing revenue growth has been a source of frustration.

Last week, the company’s president, Jamie Forese, said he was leaving the company. He struggled to have his voice heard on strategy for the sprawling division, a person familiar with the matter said at the time.