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Citi CEO: Let’s Not Talk Ourselves into a Recession

Despite a shaky market that impacted his bank’s bottom line last quarter, Citigroup CEO Michael Corbat cited economic conditions that are “stronger and more resilient than recent volatility would indicate” and urged the markets against “talking ourselves into the next recession.”

Citi was the first of the major Wall Street investment banks to report their fourth-quarter earnings this week, disclosing revenues of $17.1 billion in the period that fell shy of the $17.5 billion reported in the fourth quarter of 2017.

On the bank’s earnings call Monday morning, Corbat noted a “revenue environment [that] was more challenging than we anticipated,” particularly for market-sensitive sectors like fixed-income products.

But Corbat advised against reading too much into the volatility that rocked most major equity markets in December. While acknowledging a “more uncertain” macroeconomic environment to start the year, he warned against investors spooking themselves into a downturn in the face of solid economic fundamentals.

“We see certainly a U.S. and even more broad global economic where the underlying fundamentals [are] comprised of strong, tight labor markets, reasonable wage increases [and] good consumption,” Corbat said.

Yet concerns over a rising interest rate environment and the ongoing trade dispute between the U.S. and China, according to Corbat, have conflated to sap investor confidence and roil the markets.

“We clearly see a disconnect between what we see in our business on an anecdotal basis and what the markets are saying,” he said. Corbat added that “the biggest risk” facing the markets is “one of talking ourselves into the next recession rather than fundamentals taking us there.”

The market appeared to respond favorably to Corbat’s update, with Citi shares up 4% at the close of trading Monday, to nearly $59 per share.