Citadel I-Bank Took In Just $5.4M Last Year

May 21 2010 | 12:24pm ET

A snafu at the Securities and Exchange Commission has offered an unexpected look at Citadel Investment Group’s nascent investment banking operations.

According to the earnings statement, Citadel Securities took in $1.01 billion in revenue last year, turning an $81.6 million profit. Most of the unit’s revenue came from its original market-making business, which was established in 2001. Investment-banking operations accounted for just $5.4 million in revenue, compared to $621.6 million from principal transactions and $300.4 million from clearance income.

The regulator mistakenly posted Citadel Securities’ earnings statement on its Web site, despite Citadel’s request that it be kept confidential, according to Bloomberg News. The earnings statement has since been removed, although the public version of the filing, without the earnings statement, remains.

The earnings statement, which was required for SEC review, also shows that Citadel chief Kenneth Griffin used $60 million from a non-hedge-fund affiliate to reimburse Citadel Securities for some I-banking costs. That reimbursement was included in the $81.6 million profit; without it, Citadel Securities would have reported an anemic 1.9% return on equity. Compensation and benefits at the unit ate up $274.3 million.

The reimbursement included pay for new hires. There have certainly been a lot of those recently, with several top executives both joining and leaving the firm within the last 18 months.

The SEC filing did not include 2008 numbers for comparison.


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