Saudi prince ready to invest $2bn in Citigroup

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The Independent Online

Saudi Prince Alwaleed bin Talal, the Citigroup shareholder who came to the bank's rescue during the credit crisis of the early 1990s, might do so again now, the Wall Street Journal reported on its website last night, citing people familiar with the matter.

The billionaire from Saudi Arabia, along with China Development Bank, is expected to invest about $2bn (£1bn) in Citigroup, one person said, according to the Journal.

Asian funds have been buying up the pummelled shares of US banks in need of capital. The deals not only dilute the value of the stock, but also worry some investors who are wary about foreign ownership of US companies.

The cash-strapped Citigroup, hurt by the mortgage crisis that boiled up last year, has already got $7.5bn from the Abu Dhabi Investment Authority. On 26 November, the ADIA bought a 4.9 per cent stake in Citi, becoming its largest shareholder. Alwaleed may take back that title if he makes another investment in Citi-group, though the report said his total stake is likely to remain below 5 per cent to avoid regulatory scrutiny.

Citigroup spokesman Michael Hanretta declined to comment to The Associated Press about the report.

China Development Bank, which was established in 1994 and is now preparing to become a commercial lender, received a $20bn injection on 31 December from China's sovereign wealth fund, China Investment Corp.

In recent months, China Investment Corp said it is investing $5bn in Morgan Stanley; Singapore's state-run Temasek Holdings invested $4.4bn in Merrill Lynch; and China's government-controlled Citic Securities and US investment bank Bear Stearns agreed to invest $1bn in each other for minority stakes that could be expanded.

Alwaleed owns just under 4 per cent of Citigroup, according to data compiled by Bloomberg. Abu Dhabi surpassed him as the lender's biggest shareholder last month by acquiring a 4.9 per cent stake for $7.5bn, the Journal reported. In the 1990s, the Prince made an initial investment of $550m to bail out Citi-bank, which had hit trouble due to underperforming American real estate loans and Latin American businesses. His holdings in Citigroup now comprises half of his wealth, which is worth about $10bn.

His real estate holdings have included large stakes in the Four Seasons hotel chain and the Plaza Hotel in New York, and in January 2005 the Prince purchased the Savoy Hotel in London for an estimated £250m. AP