Exclusive: Citi aims to boost equities franchise amid industry shakeout

Mon Aug 31, 2015 8:48am EDT
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By John McCrank and Olivia Oran

NEW YORK (Reuters) - Citigroup plans to rebuild its long-neglected equities franchise seeking to capitalize on a retrenchment by rivals in the face of new rules designed to make the financial system less risky, according to people familiar with the bank's plans.

A lack of investment in equities and a traditional focus on bond trading kept the No. 3 U.S. bank by assets in the lower echelons of equities league tables, which measure how much revenue Wall Street banks earn from their equity trading units.

It will be tough to dislodge leaders such as Goldman Sachs Group, Morgan Stanley, and JPMorgan Chase & Co, that have long dominated the business.

But having shored up its business and capital ratios since the financial crisis, largely by spinning off non-core assets, Citi now aims to profit from a retreat of rivals that were slow in adapting to new rules that force banks to keep more capital, two people with direct knowledge of Citi's plans told Reuters.

Deutsche Bank, Credit Suisse Barclays and others are re-aligning their investment banking businesses. Prime brokerage units, which provide loans and other services to hedge funds, are being pared back in favor of less capital-intensive businesses such as wealth management.  

Citi, meanwhile, plans to court hedge funds more actively as part of a four-point plan to boost its equities market share, the sources said.

The strategy includes an overhaul of Citi's trading technology, hiring key executives, expanding research and boosting the unit's financing.

The bank recently appointed former Chi-X Global chief John Lowrey to head its electronic execution unit, and ex-UBS executive Adam Herrmann to run prime brokerage.   Continued...

A Citigroup office is seen at Canary Wharf  in London, Britain May 19, 2015.  REUTERS/Suzanne Plunkett