Citigroup faces Saudi setback as billionaire prince backer arrested
CITIGROUP may face new obstacles to rebuilding its Saudi Arabia business after the bank’s long- standing shareholder and promoter was arrested in an anti- corruption drive.
Authorities detained Saudi billionaire, Prince Alwaleed bin Talal, 62, on Saturday without disclosure of the allegations. The government also named former HSBC Holdings Middle East and North Africa head Mohammad Al Tuwaijri as economy and planning minister as part of the crackdown.
International lenders are expanding their foothold in the kingdom as the country overhauls its economy and plans to list Saudi Arabian Oil Co., or 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, co- chief investment officer of emergingmarkets hedge fund Capricorn Fund Managers Ltd. 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 Co., which has held Citigroup shares since 1991, increased its stake during the global financial crisis as shares plunged. While the size of Alwaleed’s position isn’t disclosed, neither he nor his company were listed among owners with a stake of five per cent or more in the New Yorkbased lender’s latest proxy filing this year.
Citigroup tried and failed to get a licence to return to Saudi Arabia in 2006 and again in 2010, despite lobbying by Alwaleed. The prince said in an interview that year 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
Authorities detained Saudi billionaire, Prince Alwaleed bin Talal, 62, on Saturday without disclosure of the allegations.
operations in the kingdom who asked to remain anonymous. Citigroup executives have long cultivated relationships with power brokers, like members of the royal family or high-ranking officials, and don’t 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 LLC banking analyst Charles Peabody said in a note to clients.
Citigroup in October appointed Carmen Haddad 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 an interview last month in Riyadh. When the bank opens in the country, it will be able to pitch for local advisory work, including IPOs and take- overs in which the target company is based in the kingdom.
Ayham Kamel, head of the Middle East and North Africa department at Eurasia Group Ltd., expects the impact on Citigroup’s relationship with the kingdom to be short lived.
“For the long term, Citigroup has an institutional relation with Saudi Arabia and it’s one of the largest banks in the world,” he said. “I don’t think the arrest signals that Citigroup will be excluded from the market.” — WP-Bloomberg