Citadel Securities Reaps Record $6.7 Billion on Volatility

(Bloomberg) -- Citadel Securities went from strength to strength in 2020, as the pandemic spurred wild swings across finance. To cap the tumult, Ken Griffin’s firm, one of the world’s biggest market makers, just posted record revenue -- some of it from a rapidly constructed Florida trading floor.

Fourth-quarter net trading revenue of $1.7 billion brought the firm’s full-year total to $6.7 billion, almost double the previous high in 2018, according to a presentation to investors. The surge came after some of its traders decamped from Chicago and New York to set up shop in a Palm Beach hotel in late March as the pandemic upended lives and markets across the globe.

The figures for the closely held firm are being disclosed to investors as part of a $2.5 billion loan Citadel Securities is seeking, with proceeds going to refinance debt and bolster trading capital.

A representative of Chicago-based Citadel Securities declined to comment.

The company’s success comes in a year that was defined by economic pain and despair for many, but will go down as one of the most lucrative environments in Wall Street history. Traders across investment banks profited from volatility sparked by the pandemic and an explosion in stock-market speculation by people cooped up at home on apps such as Robinhood Markets. Citadel Securities’ results also highlight how buttressed it is as a pure trading firm from the health catastrophe, which forced the biggest investment banks to set aside billions to cover future soured loans.

Citadel Securities brought in $1 billion of earnings before interest, taxes, depreciation and amortization last quarter and $4.1 billion for the year, also a record.

The firm, which is 85% owned by Griffin according to the Bloomberg Billionaires Index, also paid out $1.9 billion in equity distributions last year. Griffin has a net worth of $21.4 billion, according to the ranking, making him the 28th-richest person in the U.S.

“2020 was certainly a record year in terms of equity volumes,” said Bloomberg Intelligence analyst Larry Tabb, noting that U.S. equity volume was up 44% in December compared with January, with options volumes up 53% in the same period. “We haven’t seen anywhere near this going back to probably 2009.”

Citadel Securities estimates that it commands 27% of equity volume market share in the U.S., according to the presentation, up from 21% in 2017. It’s particularly dominant in retail order flow, with 46% of the market.

The firm’s balance sheet has swelled along with its profits. At the end of the third quarter it had assets of $84.2 billion, a 61% increase from the end of 2019, while its equity capital was up 37% in the same period.

Trading operations across Wall Street benefited from last year’s rally as stocks rebounded from their first-quarter plunge. Goldman Sachs Group Inc. reported this week that its equity traders increased revenue 40% in the fourth quarter, helping the firm double its annual profit, while JPMorgan Chase & Co.’s fourth quarter was its most profitable ever as its traders hauled in $5.9 billion. Rival market-making firm Virtu Financial Inc. has yet to report fourth-quarter results but was on track to beat its previous revenue highs.

Griffin’s separate hedge fund business also had a strong year, returning 24% in its flagship Wellington fund.

(Updates with Ken Griffin’s net worth in seventh paragraph.)