- Citi CFO Mark Mason said he expects to see SPAC market “normalization” as interest rates rise.
- Citi reported a 46% rise in investment-banking revenues this quarter.
- Much of that was driven by record SPAC issuance, where Citi leads the competition in underwriting.
- See more stories on Insider’s business page.
A surge in equity underwriting underpinned by record SPAC issuance led to a rise in investment-banking revenues in the first quarter across Wall Street — but one top bank CFO isn’t expecting the blank-check boom to last.
Speaking to the press after Citigroup released its first-quarter earnings, Citi’s CFO Mark Mason said that while the bank remained “well-positioned” in the SPAC space, the pace of IPOs for blank-check companies won’t remain at this level.
“I would expect to see some normalization in this market,” he said.
“I’d expect to see a decline in SPACs in line with the broader equity underwriting activity, as interest rates push investors towards surer returns,” Mason added.
The remarks represent the realization that SPAC underwriting, which has surged to record levels this year, is at least in some ways a reflection of a glut of capital chasing returns in the low-interest rate world brought on by the COVID-19 pandemic. A slowdown in blank-check deals might come as rates pick up again and as private capital investments in SPACs begin to plateau, as Insider has previously reported.
Citi is no stranger to the SPAC market. The bank has topped the tables this year in terms of blank-check activity, working on 73 deals and grabbing more market share than its next closest competitor, Goldman, according to the website SPAC Research.
SPAC issuance in 2021 has reached just shy of $100 billion across 308 IPOs. In all of 2020, meanwhile, which was a banner year for blank-check deals in its own right, those figures were $83 billion across 248 deals, according to SPAC Research.
“We had a very, very strong quarter in investment banking, more broadly,” Mason said.
Citi reported that investment banking revenue rose 46% year-over-year, prompted in large part by “strength in equity underwriting primarily reflecting higher SPAC activity,” according to the bank’s first-quarter presentation.
“It was largely led by SPACs. We’ve been a pioneer and a leader in this market for as long as it’s been around. Obviously this SPAC activity has reached record levels right now. And part of that is driven by the low interest-rate environment that we’re in,” Mason continued.
Across Wall Street, investment banks recent quarterly earnings demonstrated the surge in overall dealmaking in 2021.
Goldman Sachs, for example, reported Wednesday an astonishing 315% quarterly revenue jump in equity underwriting on the same period last year and a 73% rise in investment banking revenue as a whole.
Rival JPMorgan Chase, meanwhile, followed close behind with a 70% gain in investment banking net revenues on last year and a 57% gain in investment banking fees.
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