5th UPDATE: SWFs May Fail To Save Citi Unless Cash Found-DIC

March 05, 2008, 10:27 p.m. EST 3 Min Read

(Adds Citigroup share price fall.)

By Mirna Sleiman and Andrew Critchlow

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--Mideast sovereign wealth funds may fail to savetroubled U.S. banking giant Citigroup Inc. (C) unless more cash is pumped intothe lender, the head of a $13 billion Dubai-owned investment firm said Tuesday.

Sameer Al Ansari, Chief Executive of Dubai International Capital tolddelegates at a private equity conference that it will take more than thecombined efforts of the Abu Dhabi Investment Authority, the Kuwait InvestmentAuthority and Saudi investor Prince Alwaleed bin Talal to save the bank.

"It's going to take more than that to rescue Citi," Ansari said. He added thatmore write downs are expected and that Gulf investors would be required tobolster Citi.

Citigroup fell 2.6% to $22.50 in pre-open trade as Merrill Lynch cut thebank's earnings estimates, citing the possibility of $15 billion in subprime/CDO-related write-downs in the first quarter.

The Abu Dhabi Investment Authority, or ADIA, a sovereign wealth fund owned bythe world's fourth-largest oil exporter, last year bought a 4.9% stake in Citigroup .

The Kuwait Investment Authority also said in January it would invest $3billion in Citigroup .

Al Ansari said "it would take a lot more money to rescue Citigroup ." Aspokesperson for Citi was unable to comment immediately when called Tuesday.

Dubai International Capital, an investment firm controlled by Dubai's rulerSheikh Mohammed bin Rashid al Maktoum, owns a stake in HSBC Holdings PLC (HSBA.LN), bought 3.12% in European Aeronautic Defence & Space Co last year. Thecompany also owns a stake in Standard Chartered PLC (STAN.LN), according toZawya Investor.

Intervention

The intervention of sovereign funds such as ADIA, which pumped $7.6 billioninto Citi, has failed to stem a decline in the bank's share price that was firsttriggered by the emergence last year of an $11 billion sub-prime write-down thatled to the resignation of the then embattled chief executive Charles 'Chuck'Prince.

"It's hard to tell whether sovereign wealth funds should or should not investin foreign banks if they see another round of write-downs," Mukarram Al Atasi,head of investments at Commercial Bank of Dubai (CBD.AI), the fourth-largestlender in the Persian Gulf emirate.

Citi's share price has fallen by almost 35% since late November, when the ADIAstake purchase was first reported, till date to close at $23.09 Tuesday.

The bank said in January that it lost $9.83 billion in the fourth quarterspurred by $18 billion in write-downs. To stem the losses Citi said it plannedto raise $14.5 billion in capital by selling stakes to investors includingSaudi's Prince Alwaleed, the lenders largest single shareholder.

Since coming out in support of former chief executive Prince prior to hisresignation billionaire Alwaleed has commented little on Citi's currenttravails.

A spokesperson for Prince Alwaleed's office didn't answer calls on Tuesday.

Middle East sovereign funds flush with cash from record oil earnings arelooked upon as possible saviors for many international lenders reeling fromcontinued U.S. sub-prime losses.

Sheikh Hamad bin Jassem Al Thani, chief executive of the Qatar InvestmentAuthority, QIA, told Zawya Dow Jones in January that the emirate's sovereignwealth fund planned to invest up to $15 billion buying stakes in up to 12 blue-chip U.S. and European banks.

The Qatari fund said last month that it had built a significant stake in Credit Suisse Group (CS). The Swiss lender later said it had incurred a $2.85billion hit from bad trading.

-By Mirna Sleiman, Dow Jones Newswires, +9714 364 4966, mirna.sleiman@dowjones.com

(END) Dow Jones Newswires 03-04-08 0811ET