Will McSheehy & Matthew Brown
Bloomberg
5 Mar 08
Citigroup Inc., the biggest U.S. bank, may need additional capital from outside investors as losses stemming from the collapse of the U.S. subprime mortgage market increase, the head of Dubai International Capital LLC said.
Citigroup received $7.5 billion in November from Dubai’s neighbor, Abu Dhabi, after record mortgage losses wiped out almost half the company’s market value and led to the departure of Chief Executive Officer Charles Prince. The New York-based company said in January it was getting another $14.5 billion from investors, including the governments of Singapore and Kuwait.
“It will take a lot more than that to rescue Citi and other financial institutions,” said Sameer al-Ansari, the chief executive officer of Dubai International, at a private-equity conference in Dubai today. Dubai International is among the investment funds controlled by Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum.
Citigroup probably will report a first-quarter loss of $1.66 a share after $15 billion of mortgage-related writedowns, Merrill Lynch & Co. analyst Guy Moszkowski said in a report issued today. The company also may have $3 billion of markdowns from loans used to finance leveraged buyouts and commercial real estate, Moszkowski estimates.
Sovereign Funds
Citigroup slumped 54 percent in New York trading during the past 12 months. The stock fell 94 cents today to $22.15 in composite trading on the New York Stock Exchange at 10 a.m.
Moszkowski also cut his earnings estimates today for Bank of America Corp., the second-largest U.S. bank by assets, and Wachovia Corp., the country’s No. 4 bank, because of the deteriorating credit markets. Both companies are based in Charlotte, North Carolina.
Arab states led by Qatar, Kuwait and the United Arab Emirates, which are loaded with cash from record oil and gas revenue, have purchased stakes in U.S. and European financial institutions, including Merrill Lynch & Co., Morgan Stanley and UBS AG, as losses mounted from the U.S. mortgage market.
In all, banks and securities firms have raised about $105 billion from sovereign wealth funds, governments and public investors, according to data compiled by Bloomberg. Dubai International has invested in companies including London-based HSBC Holdings Plc, Europe’s biggest bank by market value, and New York-based hedge fund Och-Ziff Capital Management Group LLC.
“Gulf sovereign wealth funds will continue to be interested in the major U.S. financial institutions,” said Giyas Gokkent, the head of research at National Bank of Abu Dhabi, the third- largest bank in the United Arab Emirates by market value. “The scope for investments is going to be more limited than what we have seen so far.”
Prince Alwaleed Qatari Prime Minister Sheikh Hamad bin Jasim bin Jaber al- Thani said Feb. 18 that the emirate is buying shares of Zurich- based Credit Suisse Group and plans to spend as much as $15 billion on European and U.S. bank stocks in the next year.
Abu Dhabi is Citigroup’s largest shareholder, ahead of Los Angeles-based Capital Group Cos. and Saudi billionaire Prince Alwaleed bin Talal, Bloomberg data show.
The assets of state-managed funds have increased to $3.2 trillion, fueled by record oil prices and rising currency reserves. Analysts at New York-based Morgan Stanley estimate the funds’ assets will reach $12 trillion by 2015.
To contact the reporters on this story: Will McSheehy in Dubai at wmcsheehy@bloomberg.net; Matthew Brown in Dubai at mbrown42@bloomberg.net.