(Bloomberg) — Citigroup Inc. undercut rivals this week to win the biggest block trade in Australia in seven years, only to see the deal unravel and leave the US bank with unsold stock on its books.
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The firm outbid other rivals on a block trade in property firm Goodman Group by China Investment Corp. with a discount of between 1.4% to 1.5% below Tuesday’s closing price, according to people familiar with the matter. At least four other banks invited to pitch by CIC to offload the stake had teased a 3.5% to 4% discount, the people said, asking not to be named as they weren’t authorized to speak publicly.
With Citigroup unable to sell the entire block, the bank chalked up an A$27 million ($17 million) loss after putting A$1.9 billion of its own money on the line. The lender was left holding 27 million Goodman shares, more than the 23.4 million it sold in the deal that it had fully underwritten, leaving it exposed to further potential losses.
The tribulations for Citigroup underscore the risks of handling large stock sales in a fiercely competitive part of the Asia Pacific. Global banks such as UBS Group AG and Goldman Sachs Group Inc. battle with strong domestic players like Barrenjoey in an investment banking market that’s handed financial firms more than $2.1 billion in fees in the first 11 months of this year, according to data compiled by the London Stock Exchange Group.
“The recent sell downs show you how intense the competition is around winning mandates,” said Matthew Haupt, a portfolio manager at Wilson Asset Management in Sydney. Banks frequently rely on “tight discounts to try win mandates for vendor selldowns — this makes for bad outcomes for us, they tend to trade badly, like Goodman,” Haupt said.
Winning the sale mandate vaulted Citigroup from 12th place in the third quarter to first this week, according to data compiled by Bloomberg on equity and rights offerings in Australia and New Zealand. That ranking of more than 60 firms has been exclusively led annually by either Goldman Sachs or UBS over the past decade, the data show.
The surprise flop comes at a crucial time of the year for bankers as senior management discuss compensation payments and leaves Citigroup dealmakers with a slim chance of recovering lost revenue before the end of 2024.
The Goodman deal got signed off by a number of executives in different divisions. That included Achintya Mangla, the firm’s head of financing for investment banking and a key personnel in Chief Executive Officer Jane Fraser’s team, one of the people said. He recently joined Citigroup after a more than 22-year stint at JPMorgan Chase & Co., where he helped run global investment banking.
