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Thursday, August 31, 2006

Citi's Investment Bank Looks Good, Goldman Doesn't

Stocks: (C)(LEH)(GS)

According to Reuters, Goldman Sachs and Lehman Brothers lost ground in Q3 M&A and equity underwriting. The data came from Dealogic. Goldman's numbers were down two-thirds from the previous quarter in the equity underwriting category. Its M&A activity was down 58% from the immediately previous quarter.

Citigroup appeared to be one of the few exceptions to the downturn, which was probably driven by higher interest rates and a choppy stock market. Citi turned out to be the top underwriter for the period. A number of observers, including Barron's, have expressed concern that the current market is more hostile to investment banking activity. Citi appears to have dodged that bullet for now.

Citi and Goldman have taken opposite paths in the stock market, and Citi has been under pressure from institutional investors to consider breaking the big financial institution into pieces. Goldman's stock is at the high end of its 52-week range at $147, up from a low of $109.84. Citi had been at the lower end of its range around $47, but has recently moved up to $49.

If the investment banking numbers are any indication of revenue and earnings for the third quarter of the year, then Goldman could be in for a fall, and Citi may regain some of its luster.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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