(Bloomberg) -- Citadel Securities third-quarter revenue rose more than 8% as the privately held market-making firm seeks to grab more of Wall Street’s trading business.
The firm run by Chief Executive Officer Peng Zhao generated $1.8 billion in the period, up from $1.66 billion a year earlier, according to people with knowledge of the matter. The figure has exceeded $1 billion for 15 straight quarters, the people said, asking not to be identified disclosing private information.
Interest-rate hikes, recession fears and Russia’s invasion of Ukraine generated trading windfalls in 2022, then started to subside. But last quarter saw a return of dramatic market swings as the Federal Reserve’s push to quell inflation with higher interest rates spurred demand for trading services. The biggest five US banks pulled in more than $26 billion in trading revenue during the third quarter, up 1.3% from a year earlier. JPMorgan Chase & Co. took in the most at $6.6 billion.
Founded by billionaire Ken Griffin, Citadel Securities matches buyers and sellers in the equity and fixed-income markets. It generated about $7.5 billion in revenue last year, using algorithms to capture and profit from tiny differences in prices. The firm serves asset managers, banks, broker-dealers, hedge funds, government agencies and public pension programs.
A representative for Miami-based Citadel Securities declined to comment on its recent performance.
The new figures were disclosed as part of an ongoing loan transaction the company is in the process of selling to debt investors.
The firm brought in about $940 million of earnings before interest, taxes, depreciation and amortization during the third quarter, a 20% increase from a year earlier, the people said. Following the loan transaction, the company’s total cash on the balance sheet will stand at roughly $3.9 billion, with total debt at around $3.9 billion.
Citadel Securities launched a $400 million loan on Monday with proceeds to be used for general corporate purposes including trading capital, Bloomberg reported. The new debt, which holds the lowest rung of investment-grade ratings, will be added to the company’s existing $3.54 billion term loan. Bank of America Corp. is leading the transaction and institutional investors must decide if they will participate by Wednesday.
The firm came into prominence in the era of meme stocks, and is responsible for about a third of all US retail stock trades. It’s ramping up its presence across fixed income beyond interest-rate swaps and Treasuries to serve institutional investors in corporate debt trading.
While revenue and earnings were down on a year-over-year basis in the first half of 2023, the third quarter is showing improvement due to the increase in market volatility. Net trading revenue was $4.5 billion from January through the end of September, down about 23% from the same period in 2022, the people said. The company’s earnings before interest, taxes, depreciation and amortization was around $2 billion in those three quarters, down about 41% from 2022.
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