(Adds earlier comments from Citi CFO, share price drop to 10-year low.)
By Mirna Sleiman and Andrew Critchlow
Of ZAWYA DOW JONES
DUBAI (Zawya Dow Jones)--U.S. banking giant Citigroup Inc. (C) will requiremore investment from sources like oil-rich Mideast sovereign wealth funds amidfurther write-downs related to U.S. subprime mortgages, the head of a $13billion Dubai-owned investment firm said Tuesday.
Sameer Al Ansari, chief executive of Dubai International Capital, tolddelegates at a conference in Dubai that it will take more funds than havealready be pledged by the Abu Dhabi Investment Authority, the Kuwait InvestmentAuthority and Saudi investor Prince Alwaleed bin Talal to shore up the biggestU.S. bank by assets.
"It's going to take more than that to rescue Citi," Ansari said.
The comments from the head of an active Middle East sovereign wealth fund withstakes in some western banks but not Citigroup show plainly that big investorsdon't by any means think the worst is over for financial institutions reelingfrom heavy losses in an ugly fourth quarter.
Sameer Al Ansari's comments came as Merrill Lynch (MER) slashed its 2008earnings estimates for Citigroup (C) and forecast another very large write-downof Citi's subprime-related exposures. Citigroup's shares were trading 7.2% lowermidmorning at $21.43, their lowest level in nine years.
A Citigroup wouldn't comment on "market rumors," but pointed to mid-Januarycomments by Chief Financial Officer Gary Crittenden, who said the bank hadraised enough cash to cover its needs through a variety of stressful,recessionary scenarios.
The bank built a cushion against "further declines in subprime markets, ouroutstanding leveraged finance commitments, potential downgrades in monolinecredit ratings and a number of other items," Crittenden said at the time.
Citigroup has raised more than $26 billion over the past three months fromsovereign investors in the Middle East and Asia, as well as from the public. Thecapital raising was forced by more than $20 billion in credit-related losses inthe last half of the year and a $9.83 billion net loss in the fourth quarter,after the bank badly overextended itself ahead of the credit crunch.
Middle East funds were prominent in the capital raising. The Abu DhabiInvestment Authority, or ADIA, a sovereign wealth fund owned by the world'sfourth-largest oil exporter, last year bought a 4.9% stake in Citigroup . ADIA,the largest sovereign wealth fund in the Middle East, is estimated to have $900billion of assets under management. The Kuwait Investment Authority said inJanuary it would invest $3 billion in Citigroup .
Al Ansari said, "it would take a lot more money to rescue Citigroup ."
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. (EADSY) lastyear. The company also owns a stake in Standard Chartered PLC (STAN.LN),according to Zawya Investor.
The intervention of sovereign funds such as ADIA, which pumped $7.6 billioninto Citi, has failed to stem a decline in the bank's shares triggered by theemergence last year of big losses that led to the resignation of embattled chiefexecutive Charles Prince. Citigroup's shares have fallen by 27% so far thisyear.
"It's hard to tell whether sovereign wealth funds should or should not investin foreign banks if they see another round of write-downs," said Mukarram AlAtasi, head of investments at Commercial Bank of Dubai (CBD.AI), the fourth-largest lender in the Persian Gulf emirate.
Saudi Arabia's Prince Alwaleed, who came out in support of Prince before theCEO resigned, has commented little on Citi's current travails. A spokespersonfor 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.
The Persian Gulf's booming states are expected to generate $9 trillion in oilexport earnings based on an average of $100 a barrel over the next 14 years,four times their income over the last 14 years, according to consultantsMcKinsey & Co.
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.
Qatar's investment fund is fed from the proceeds of the world's largest singlenatural gas field in the Persian Gulf. The Qatari fund said last month that ithad built a significant stake in Credit Suisse Group (CS). The Swiss lenderlater said it had incurred a $2.85 billion hit from bad trading.
-By Mirna Sleiman, Dow Jones Newswires, +9714 364 4966, mirna.sleiman@dowjones.com
(Andrew Critchlow in Dubai, Marietta Cauchi in London and Marshall Eckblad in New York contributed to this article.)
Corrected March 4, 2008 14:39 ET ( 19:49 GMT)
Sameer Al Ansari's comments came as Merrill Lynch (MER) slashed its 2008earnings estimates for Citigroup (C) and forecast another very large write-downof Citi's subprime-related exposures. Citigroup's shares were trading 7.2% lowermidmorning at $21.43, their lowest level in nine years.
(The item "7th UPDATE: Citibank Will Need More Capital,Dubai Fund Says,"published around xxx EST, incorrectly said Citigroup shares fell to their lowestlevel in 10 years.)-o-
(END) Dow Jones Newswires 03-04-08 1107ET
