A comfortable relationship
As the enthusiasm for shares of Citigroup (NYSE:C) following an incredible turnaround quarter begins to fade, there appears to be more good news coming. Prince Alwaleed Bin Talal, the Saudi Prince who is a large investor in Citigroup, announced this week that the globally reaching, New York based bank is applying to open an office in Saudi Arabia. Citigroup stock traded in the mid 4 dollar range at close yesterday; down from the previous day’s trading with continued heavy volume. Profit taking and slow but steady unloading of the US governments position most likely has been a factor in the downward momentum.
The news of Citigroup’s imminent return to the kingdom comes several years (six) after the bank sold its 20 percent ownership of Saudi American Bank (now known as Samba Financial Group) after the Saudi government forced foreign banks to sell their shares of Saudi American to Saudi nations. Citigroup sold its 20 percent holding in Saudi American Bank, to a state investment group in 2004, netting $760 million. The same stake today is worth about 3 billion dollars. The previous year, it had ended its management contract with the bank after first selling a 2.83 percent stake. Since leaving Saudi Arabia in 2004, Citigroup has said it would like to regain a foothold in Saudi Arabia and plans to take full advantage of the possibility with the economic recovery rolling along and the Bank strengthening and streamlining itself; shedding the assets it acquired during the Sanford Weil merger era. Prince Alwaleed said on April 27 in an interview with Bloomberg Television that the country “welcomes the presence of a Citibank office.” Alwaleed stated he’s helping New York based Citigroup and its chief executive officer, Vikram Pandit, set up in Saudi Arabia.
The Prince also recently commented how the Citibank franchise is unique. He continued with the following “With respect to all banks that are in the United States, no one matches Citigroup in its global reach all over the world. With world economies getting out of the recession in general, no doubt that Citigroup will benefit greatly. And we have seen how Citigroup surprised the whole world with its $4.4 billion Q1 results. And I’ll tell you, even with this $4.4 billion – still Citigroup is taxiing for takeoff. This was not the full potential of Citigroup; so the potential of Citigroup quarter after quarter is alot more than $4.4 billion.” Citibank was successful in the past in Saudi Arabia, but times have changed. Saudi officials seem to be protecting their banks from new competition and are not as enamored with US banks as they used to be. With Prince Alwaleeds influence, it certainly seems that Citigroup has a better than average chance of getting a license for Saudi Arabia and if past performance is relative; Citigroup will do well there again. As a large stakeholder, I am sure the Prince is banking on it! Pun intended….
Disclosure: currently no position in C
