Citigroup Inc. is losing market share in European investment banking as the last partially U.S. government-owned securities firm slides down the rankings for merger advice, stock sales and bond offerings.

At least 12 European managing directors have left this year for competitors including Bank of America Corp. and Barclays PLC's investment banking unit. Citigroup fell to eighth from first in providing merger advice on European transactions this year valued at $61 billion compared with about $140 billion in the same period a year earlier, data compiled by Bloomberg News show.

"Citigroup's primary objective right now is to rebuild its balance sheet and prove to the market that it is functioning properly," said Richard Bove, an analyst at Rochdale Securities in Lutz, Fla., with a "buy" rating on the stock. "Until it can do that, everything else is secondary."

Citigroup hasn't led a single initial public offering in Europe, the Middle East and Africa this year after underwriting only one in 2009. It was one of the region's top-10 arrangers from 2006 to 2008 when it was involved with 43 IPOs, according to data compiled by Bloomberg. There have been 85 IPOs in the region this year, according to the data.

Citigroup ranks ninth in the U.S. on M&A advice this year, down from fifth last year, the data shows. In the Asia-Pacific region, it dropped to 17th place from fourth, the data shows. Globally, the company is the eighth-ranked adviser for mergers this year after advising on about $157 billion of takeovers, down from third last year. Goldman Sachs Group Inc., the top-ranked adviser, worked on $305 billion of deals in 2010.

Former Citigroup bankers in London, who did not want to be identified, cited slowing deal flow, the company's focus on investment banking outside of Western Europe and the prospect of shrinking bonuses for the moves.

"Several of the departures were mutual, and in some cases welcome," Citigroup said in an e-mailed statement. "We have also made a number of important new senior hires, and plan to announce more over the next few weeks. Our banking franchise in Europe, Middle East and Africa is vibrant and expanding."

Citigroup's revenue globally from advisory, debt and equity underwriting fell 42%, to $674 million in the second quarter of 2010. JPMorgan Chase & Co. posted a 37% drop in those businesses, to $1.41 billion for the same period. That compares with a 21% decline in investment banking revenue at Morgan Stanley.

Citigroup "has a new strategy in place" that focuses increasingly on emerging markets, said Richard Staite, an analyst at Atlantic Equities Partners LLP in London, who has an "overweight" recommendation on the stock.

The bank plans to nearly triple its work force in China to as many as 12,000 people in the next three years, Stephen Bird, Citigroup's co-chief executive of the Asia-Pacific region, said in an interview.

Citigroup agreed in March to pay $519 million for an additional stake in the company that controls Banco de Chile, the country's second-biggest lender. At a forum in Davos, Switzerland, this year, Citigroup's CEO, Vikram Pandit, said consumers in those regions are set to spend more and that returns on emerging market investments are likely to be "robust."

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