Citigroup Global Markets Competition
Now Viewing Citigroup Global Markets's competition in: Investment Banking
Recent Developments
Investment Banking Climate Changing - The Federal Reserve will allow the last two major investment banks, Goldman Sachs and Morgan Stanley, to create commercial banks that can take deposits, bolstering the resources of both institutions in order to stay in business. The change means both companies will come under the direct regulation of the Fed, facing the stricter regulations that commercial banks are required to meet. Both institutions had come under pressure ever since the bankruptcy filing by investment bank Lehman Brothers and the forced sale of investment bank Merrill Lynch to Bank of America.
Collateralized Debt Obligations Terminated - Collateralized debt obligations (CDOs) are being terminated as investment banks try to settle contracts with insurers early to avoid possible future problems. Bond insurer Ambac Financial Group paid $850 million to Citigroup to terminate its CDO tied to mortgage-related securities. Security Capital paid $500 million to Merrill Lynch to terminate contracts tied to $3.74 billion in CDOs. Investors expect more cancellations; banks that settle with insurers quickly benefit from capital certainty and avoid potential problems if insurers become insolvent.
Citigroup Launches Pilot for Super-Rich - Citigroup will launch a pilot program for the super-rich, those with $25 million in net worth, called the Citi Private Bank. The pilot is further evidence of the firm's attempt to segment its clients and focus on integrating services for its super-rich clients. UBS, Morgan Stanley, and Merrill Lynch have similar private wealth management divisions focused on their wealthiest customers.
Competitive Landscape
Demand is driven by economic activity that results in company mergers, acquisitions, or public financing. The profitability of an investment bank depends on its ability to accurately assess both the value of a business transaction and the readiness of the market to buy the attendant debt or equity. Big firms have an advantage because large customer transactions require firms with substantial financial resources. Small investment banks can compete by participating in syndications and operating in regional markets or specialized industries. Although labor-intensive, the industry produces very high value: average annual revenue per employee at large firms is close to $1 million.
Investment Banking Industry Forecast
from Hoover's/D&B subsidiary First Research
The output of US securities, commodity contracts, and investments, an indicator for investment banking, is forecast to grow at an annual compounded rate of 3.3 percent between 2007 and 2012.
Securities, Commodities, and Investment Growth Level
First Research forecasts are based on INFORUM forecasts that are licensed from the Interindustry Economic Research Fund, Inc. (IERF) in College Park, MD. INFORUM's "interindustry-macro" approach to modeling the economy captures the links between industries and the aggregate economy.
First Research Opportunity Rating
The First Research Opportunity Rating is First Research's estimate of industry performance vs. industry risk over the next 12 to 24 months.
- Demand: Baby boomers have more money
- Need good marketing
- Risk: Falling asset values reduce fees
Industries Where Citigroup Global Markets Competes
- Financial Services
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Securities Brokers & Traders (primary)
- Equity Trading
- Fixed-Income Trading
- Institutional Brokerages
- Investment Banking
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Securities Brokers & Traders (primary)
