Citigroup shores up with Abu Dhabi stake sale

The move is aimed at shoring up the world's biggest bank's capital base at a time of unprecedented crisis.

Citi is reeling from the credit crunch and expects writedowns of up to $11 billion in the fourth quarter. Still lacking a chief executive since the departure of Chuck Prince at the start of the month, it could even fall into the red.

Last night it emerged that the bank could be shedding as many as 45,000 staff under a programme to get its costs under control. The Canary Wharf European base has seen scores of cuts already.

Some analysts warn that the bank is still underestimating the scale of the problem.

However, today's deal was taken as a much-needed vote of confidence for Citi, whose largest shareholder, Prince Al-Waleed bin Talal comes from Abu Dhabi's neighbour Saudi Arabia.

The Abu Dhabi group is one of the growing number of sovereign investment funds with coffers bulging with cash and looking for investments overseas.

Gulf states in particular have seen unprecedented inflows of cash from record oil prices and are beginning to flex their muscles.

Abu Dhabi recently picked up an 8.1% stake in US chip giant Advanced Micro Devices, while Dubai International Capital, which is owned by the ruler of that booming city-state, said yesterday that it had bought into electronics giant Sony. It has also taken stakes in HSBC, Daimler, US hedge fund manager Och-Ziff Capital Management, the Indian bank Icici and Airbus parent Eads.

Near neighbour Qatar's sovereign fund this year became one of the London Stock Exchange's biggest shareholders and was also behind the recent abortive bid for J Sainsbury.

Citigroup's acting chief executive, City veteran Sir Win Bischoff, welcomed Abu Dhabi to the share register.

"This investment, from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business," he said.

The Abu Dhabi Investment Authority is buying equity units, which will be convertible into Citi shares at a price of up to $37.24 a share between 15 March 2010 and 15 September 2011.

The investment is expected to close within the next few days.

"We see in Citi a highly respected company with a premier brand and with tremendous opportunities for growth," the Investment Authority's managing director, Sheikh Ahmed bin Zayed Al Nahyan, said.

"This investment reflects our confidence in Citi's potential to build shareholder value."

That value has taken a beating in recent months and, ahead of the announcement, the share price fell below $30 in New York, its lowest point for five years as concerns continue about the size of its losses and the bank struggles to find a successor to Prince.

Prince fell on his sword over the huge writedowns. In the third quarter, the bank's exposure to assets tied to subprime mortgages led to a loss of about $6.5 billion.

In April, before the full size of the disaster was revealed, Citi said 17,000 jobs would go, about 5% of its workforce. But Citi said "any reports on specific numbers (of job cuts) are not factual".