Citigroup faces Saudi setback
• Global lender may struggle to secure future business after shareholder is arrested in anticorruption crackdown
Citigroup may face new obstacles in its efforts to rebuild its Saudi Arabia business after the bank’s longstanding shareholder and promoter was arrested in an anticorruption drive by the kingdom’s government.
Citigroup may face new obstacles to rebuilding its Saudi Arabia business after the bank’s longstanding shareholder and promoter was arrested in an anticorruption drive.
Prince Alwaleed bin Talal, the 62-year-old Saudi billionaire, was detained by authorities on Saturday without disclosure of the allegations.
The government also named Economy and Planning Minister Mohammad Al Tuwaijri, the former HSBC Holdings Middle East and North Africa head, as part of the crackdown.
Global lenders are expanding their foothold in the kingdom as the nation overhauls its economy and plans to list Saudi Arabian Oil Company (Aramco), in what could be the largest initial public offering in history.
Citigroup, which lost its Saudi investment banking licence by selling its stake in Samba Financial Group in 2004, has been plotting a return. The bank got a new licence in April.
Alwaleed’s arrest is “likely to make things more difficult for Citigroup in Saudi due to companies and individuals being cautious of any association”, said Emad Mostaque, joint chief investment officer of emergingmarkets hedge fund Capricorn Fund Managers. The bank had a “turbulent time in Saudi Arabia after they backed out of Samba and have steadily built their presence back up”, he said.
A spokeswoman for Citigroup declined to comment.
Alwaleed’s Kingdom Holding Company, which has held Citigroup shares since 1991, increased its stake during the global crisis as shares plunged.
While the size of Alwaleed’s position is not disclosed, neither he nor his company were listed among owners with a stake of 5% or more in the New Yorkbased lender’s latest proxy filing in 2017.
Citigroup tried and failed to get a licence to return to Saudi Arabia in 2006 and again in 2010, despite lobbying by Alwaleed, who said in an interview that he was helping the bank set up in the kingdom.
If Alwaleed faces charges even remotely connected to the licensing of Citigroup, its ability to get future business from the kingdom would be diminished, said Joice Mathew, head of equity research at United Securities in Muscat. “It would no longer be a cakewalk for them as we anticipated earlier. Their licence is there to stay, but they would have to sweat a lot for generating business.”
The bank’s base of support in Saudi Arabia is broader than Alwaleed, according to two people familiar with the company’s operations in the kingdom who asked to remain anonymous.
Citigroup executives have long cultivated relationships with power brokers, such as members of the royal family or high-ranking officials, and do not rely on Alwaleed for bank business such as licensing, one of them said.
“While Citigroup’s Saudi Arabian operations are not currently a material contributor to Citigroup’s bottom line, it was being viewed as a significant source of future growth as the company sought to capitalise on the pending financial reforms in that country,” Compass Point Research & Trading banking analyst Charles Peabody said.
Citigroup appointed Carmen Haddad in October to oversee its business in the kingdom, according to an internal memo. The lender aims to have about half of its investment banking team in place by December and be fully staffed in the first quarter of 2018, Haddad said in October.