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Thursday, October 19, 2006

Investment Banking Slows Citi, Anyone For A Break-Up

Stocks: (JPM)(C)(BAC)

Investment banking had to slow down sometime. The pace of IPOs could not go on forever. Private equity transactions had to slow down. The corporate bond market could not improve forever.

And, the dropping pace of these businesses hit Citigroup. Investment banking reveue was down 6% and bond revenue dropped 16%.

Citi's stock performance has trailed rivals JP Morgan and Bank of America by a wide margin this year. While Citi's shares are up about 12%, B of A is up 27% and JPM is up 36%.

With a slowing investment banking environment, Citi now has to worry about its retail and credit card businesses as well. Those areas were the ones that hurt JPMorgan's results and the interest rate environment that hurt JPM is likely to affect Citi as well.

If Citi's retail operations join the investment bank in a downturn, the calls to break the company into smaller pieces may grow louder.

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

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