BUSINESS NOVEMBER 20, 2008, 12:48 P.M. ET Citi Gets No Lift From Alwaleed's Vote of Confidence
By ANDREW CRITCHLOW
DUBAI -- Saudi investor Prince Alwaleed bin Talal thinks Citigroup Inc.'s shares are undervalued, but he doesn't appear to have much company.
The prince said Thursday he will increase his holdings in Citigroup back to 5% and expressed his support for the banking giant's management. But after a brief bounce, the bank's shares resumed their slide, dropping 22% to $5 in recent trading amid mounting concerns about losses and doubts about management's ability to turn things around.
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"Prince Alwaleed began buying Citi shares as he strongly believes that they are dramatically undervalued," according to an emailed statement from his office. Prince Alwaleed's holdings in Citi are currently less than 4%, according to the statement.
Citigroup, still freighted with troubled assets and facing mounting losses on consumer loans as economies around the world slide into recession, is struggling to restructure its balance sheet and cut costs, with 52,000 job losses planned over the next year. The prince, a key long-term shareholder in the bank, gave Chief Executive Vikram Pandit a key vote of confidence in those efforts.
Mr. Alwaleed expressed "his full and complete support to Citi management, led by Mr. Pandit, and believes they are taking all necessary steps to position the company to withstand the challenges facing the banking industry and the global economy," according to the statement.
Yet the market is showing more skepticism. The drop in the U.S. banking giant's shares follow a plunge of 23% Wednesday, their worst fall, after it announced it will buy the last $17.4 billion in assets held by its structured investment vehicles. Citi will take a $1.1 billion write-down to reflect the assets' eroded values.
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Citi has raised $50 billion in private capital, in addition to the $25 billion that the U.S. government has provided under the Troubled Asset Relief Program, the statement said.
Billionaire Mr. Alwaleed is one of the Middle East's biggest foreign investors. He first took a stake in Citi in 1991 and is estimated to be the world's 19th wealthiest billionaire, with a fortune of about $21 billion, according to Forbes magazine.
"Clearly, the vote of confidence by Mr. Alwaleed is due to his belief in the abilities of the current management," said Marina Akopian, who manages the HEXAM Capital EMEA Absolute Return Fund in London. "It's just yet another example of who holds the cash in the modern world."
Citi is one of the biggest U.S. beneficiaries of investment from the oil-rich Arab states of the Persian Gulf. Abu Dhabi Investment Authority, the region's largest sovereign wealth fund, injected about $7.6 billion into the bank last year.
Investors from the region, which pumps a fifth of the world's oil, have become "white knights" for troubled banks in Europe and the U.S. Abu Dhabi and Qatari royals recently teamed up on an $11.6 billion recapitalization of British banking giant Barclays PLC.
Saudi investor Maan al-Sanea bought a big stake in HSBC Holdings PLC last year. Last month, Olayan Group boosted its stake in Credit Suisse Group, one of a number of big Western investments by the family-run Saudi conglomerate and investment firm.
The Qatar Investment Authority led an $8.8 billion investment in Credit Suisse, the investment in which Olayan Group also participated |
