Citigroup to Strengthen Prop Desk

Citigroup wants to build its proprietary trading business, an area in which rivals have made big profits in the past few years.

Matthew Carpenter, director of research for the Americas at the U.S. bank, said at a Securities Industry Association conference in New York: "Proprietary trading is going to be a bigger part of our business. We want to grow the business organically."

Chris Meyer, an analyst at Morgan Stanley, in June compared the ability of the largest investment banks to translate trading risk into revenues over the past five years. Citigroup had increased risk without a commensurate rise in revenue, he found. His report said: "Citigroup is getting its bigger bets wrong just as often as it is getting them right."

Bear Stearns, Deutsche Bank and Lehman Brothers have been the most successful at developing their trading business without taking too much risk, according to the research.

However, the Securities Industry Association predicted last month that industry profits would fall by a fifth to $20 billion next year, partly because the "outsized gains in proprietary trading will come to an end".