Business headlines around the world are abuzz with news of the Abu Dhabi Investment Authority (ADIA) and its $7.5 billion capital injection into Citigroup. Today’s Financial Times opines that such liquidity injections from cash-rich sovereign investors could prove a “template for other banks hit by the US subprime crisis.” The FT may be right, but the point is even broader – it’s not just the banks that are affected by subprime woes.
ADIA – one of the world’s most important institutional investors – is a stable, conservative investor seeking solid returns mainly in mature markets. Citigroup, believed by many to be undervalued these days, fits ADIA’s investment criteria nicely. Look for ADIA to make a healthy, passive, long-term return.
Citigroup has another major Gulf investor – Prince Alwaleed Bin Talal of Saudi Arabia – whose approach is far more active. Alwaleed holds about 4% of the bank’s equity, and is a hands-on member of Citigroup’s board. Insiders report that Alwaleed has been known to interact directly with management and drill down on the details of the bank’s operations. Alwaleed bought into Citigroup at a similar dip, and has played a meaningful part in the company as the firm’s largest individual shareholder. Alwaleed is also a major shareholder in the Four Season’s Hotel (with Bill Gates), Apple, and a host of other prominent companies.
Alwaleed’s influence on Citigroup has not, interestingly, yet translated into any apparent increase in the bank’s focus on the Gulf. Having divested from the Saudi American Bank (Samba), Citi – unlike HSBC, ABN Amro, and Credit Agricole – has no joint venture bank in the lucrative (but protected) Saudi market. In the UAE, Bahrain, and elsewhere, Citi’s growth ambitions appear to be comparable to those of its peers. Alwaleed’s interventions at Citi – like elsewhere – are apparently at the global, portfolio-wide level.
(For more on the JV banks in Saudi Arabia, see Chapter 5 – “A Piece of the Action: Strategies for Entering the GCC Market” – of Dubai & Co. For more on ADIA and Alwaleed, seeChapter 8 – “Capable Capital: The GCC as a Source of Capital.”)
Yes, ADIA’s investment is playing a meaningful role in helping Citigroup through tough times. Alwaleed, however, will almost certainly have greater impact – and far more direct involvement – in charting the global bank’s path.
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