Citigroup faces setback in Saudi revival

Prince Alwaleed's Kingdom Holding, which has held Citigroup shares since 1991, raised its stake during the global financial crisis as shares plunged.
Prince Alwaleed's Kingdom Holding, which has held Citigroup shares since 1991, raised its stake during the global financial crisis as shares plunged. PHOTO: BLOOMBERG

Citigroup may face new obstacles to rebuilding its Saudi Arabia business after the bank's longstanding shareholder and promoter was arrested in an anti-corruption drive.

Prince Alwaleed bin Talal, the 62-year-old Saudi billionaire, was detained by the authorities last 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 nation 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.

Prince 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 Mr Emad Mostaque, co-chief investment officer of emerging markets 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".

Prince Alwaleed's Kingdom Holding, which has held Citigroup shares since 1991, raised its stake during the global financial crisis as shares plunged. While the size of his position is not disclosed, neither he nor his firm was listed among owners with a stake of 5 per cent or more in the New York-based 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 Prince Alwaleed's lobbying. He said in an interview that year that he was helping the bank set up in the kingdom.

If he faces charges even remotely connected to the licensing of Citigroup, its ability to get future business from the kingdom would be diminished, said United Securities head of equity research Joice Mathewt.

"It would no longer be a cakewalk for them as we anticipated. 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.

Citigroup executives have long cultivated relationships with power brokers, like members of the royal family or high-ranking officials, and do not rely on Prince Alwaleed for bank business like licensing, one of them said.

The bank in October appointed Ms 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, Ms Haddad said in an interview last month.

When the bank opens in the country, it will be able to pitch for local advisory work, including IPOs and takeovers in which the target company is based in the kingdom.

Even without a licence, Citigroup won leading roles in the kingdom's record-breaking US$17.5 billion (S$24 billion) bond sale in 2016 and US$9 billion Islamic bond earlier this year.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 07, 2017, with the headline 'Citigroup faces setback in Saudi revival'. Print Edition | Subscribe