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Citigroup (NYSE:C) is getting back in the gameand not quietly. After years on the sidelines, the bank is reigniting its private equity lending engine, targeting the booming $900 billion subscription line market that's become a must-have tool for today's buyout giants. These aren't high-margin loans, but they open the door to relationships that matterfund managers who might one day tap Citi to underwrite junk bond deals or quarterback multibillion-dollar M&A. CEO Jane Fraser is betting big here, aiming to push returns on tangible common equity to 1011% by the end of next year, up from 9.1% last quarter. The goal: stop trailing JPMorgan and Goldman, and start leading again.
This isn't just about catching upit's about reclaiming ground Citi once gave up. When First Republic and Signature Bank collapsed in 2023, rivals swept in to grab their subscription loan books. Citi watched from the sidelines. Now, with regulators preparing to ease Basel III Endgame rules, Fraser is seizing the moment. She poached JPMorgan's star dealmaker Vis Raghavan to lead global banking, and re-committed the firm to capital-call credit linessafe, short-term loans backed by investor commitments that almost never default. The appeal? These loans grease the wheels during deal slowdowns and help banks stay close to the clients who matter most.
The trend is clear: Nearly 85% of buyout funds used subscription lines in 2023, compared to just 25% a decade ago. The need for liquidity hasn't gone awayit's only become more urgent. And while others feasted in Citi's absence, Fraser is making it clear: this isn't just a tactical move. It's a structural reset. Citi doesn't want to dabble in private capital. It wants to become essential to it.
This article first appeared on GuruFocus.