Magazine article American Banker

Citi Says It's Committed to Mideast despite Deal

Magazine article American Banker

Citi Says It's Committed to Mideast despite Deal

Article excerpt

Citigroup Inc. is ending its direct investment in Saudi Arabia by agreeing to sell its 20% stake in Samba Financial Group to a Saudi public entity.

The New York banking company will record a second-quarter after-tax gain of $760 million, or 15 cents a share. That will mitigate a previously announced $4.95 billion after-tax charge (95 cents a share) to settle litigation and other matters related to Citi's work on WorldCom Inc.

A Citigroup spokeswoman said the decision to sell the stake in Samba (formerly the Saudi American Bank) to Public Investment Fund "is based on our commitment to evaluating our portfolio of investments and reallocating capital."

After the sale Citigroup will have no branches or any other direct investment in Saudi Arabia. But the spokeswoman said it remains committed to the Middle East and Saudi Arabia and that it is actively exploring new opportunities.

One of Citigroup's largest individual shareholders, Prince Alwaleed Bin Talal Alsaud, a nephew of King Fahd, has a 5.15% ownership worth about $10 billion.

Richard X. Bove, an analyst with Hoefer & Arnett, said in an interview that it is very doubtful Citigroup will get out of Saudi Arabia altogether.

But Citi's new chief executive officer, Charles O. Prince, has stressed he will sift through the company's businesses and get rid of those that do not meet their return-on-investment goals, Mr. Bove noted.

Another analyst suggested it was lack of control over the investment that prompted Citi's decision. Richard E. Caddell, with Blaylock & Partners, wrote in a research note that Citi prefers to have operational control even in its joint ventures, and "as part of the management changes last year, has reviewed its portfolio in recent months and sold some non-core assets."

Citi's first branch in Saudi Arabia opened in 1955. …

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