Analysis

Citi flexes SPAC muscles for a record profit

, Financial Review

Citigroup’s equities desks, undersized among Wall Street’s giants, are proving strong enough to lift the firm to a record quarterly profit just as a new chief executive officer takes the helm.

The bank reaped the most revenue from stock trading in the first quarter since 2009, while fees from underwriting shares quadrupled, helped by the firm’s dominance in taking blank-check companies known as SPACs to public markets. That offset a slump in revenue from Citigroup’s massive fixed-income trading division.

Citigroup has raised more than any other bank for special-purpose acquisition companies this year, as managers of the vehicles set out to hunt unspecified takeover targets. That helped the firm reap $US876 million ($1.1 billion) in fees from equity underwriting. Quarterly stock-trading revenue, typically less than $US1 billion at Citigroup, surged to $US1.48 billion.

Altogether, Citigroup’s revenue from trading fixed-income, currencies and commodities slipped 5 per cent to $US4.55 billion. While that topped analyst estimates, it paled in comparison to the 31 per cent and 15 per cent gains posted on Wednesday by rivals Goldman Sachs and JPMorgan Chase & Co, respectively.

Total revenue in the quarter slipped to $US19.33 billion, hurt by a 14 per cent drop in revenue from the firm’s sprawling global consumer bank. Net income climbed to $US7.94 billion, topping the $US5.1 billion projected by analysts.

Uncertain is whether the SPAC boom may continue. Regulators in the US are voicing concerns that already have put the brakes on new deals this quarter.

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