Kuwait fund sells Citigroup stake, banks big profit

DUBAI, United Arab Emirates — Kuwait’s sovereign wealth fund said Sunday it booked a profit of $1.1 billion by selling the stake it took in Citigroup Inc. less than two years ago when the banking giant was strapped for cash.

DUBAI, United Arab Emirates — Kuwait’s sovereign wealth fund said Sunday it booked a profit of $1.1 billion by selling the stake it took in Citigroup Inc. less than two years ago when the banking giant was strapped for cash.

The Kuwait Investment Authority said in a statement it sold the preferred shares after converting them to common stock for $4.1 billion. That works out to a gain of nearly 37 per cent on its $3 billion investment.

Calls to the Kuwait fund for further details went unanswered. A Citi spokesman declined to comment.

Gulf Arab countries’ sovereign wealth funds have been heavy investors in U.S. and European companies, using their oil wealth to buy large stakes in companies ranging from Citi to Germany’s Volkswagen AG and Mercedes-Benz parent Daimler AG.

The KIA joined other big investors — including the Government of Singapore Investment Corp. and longtime shareholder Prince Alwaleed bin Talal of Saudi Arabia — in pumping some $12.5 billion into New York-based Citi in January 2008. At the time, the bank was reeling from a huge drop in the value of its mortgage holdings.

At the same time it made its Citi investment, the fund took a $2 billion stake in Merrill Lynch, which also needed cash as a result of the credit crisis.

Merrill was later bought by Bank of America Corp., which last week surprised investors by paying back $45 billion in federal bailout money.

Analysts say that move puts pressure on Citi and other banks that tapped U.S. government aid to follow suit, even though they still could face further losses as consumers struggle to pay their bills.

The Kuwait fund’s move came as a surprise. In September, it said it had no intention of selling its holdings in either Citi or Bank of America in the short term because its investment policies are based “on a long-term vision.”

Kuwait took its stake in Citi last year after another Gulf fund, the Abu Dhabi Investment Authority, paid $7.5 billion for a 4.9 per cent stake in the company. ADIA’s holdings, known as “equity units,” will begin to convert into ordinary shares starting in March next year.

A spokesman for the Abu Dhabi sovereign wealth fund, the world’s largest, declined to comment on plans for its Citi stake.

Kuwait’s fund is not the first major Gulf investor to cash in on the sharp rebound of western banks’ shares this year.

Abu Dhabi’s International Petroleum Investment Co. made a $2.5 billion profit in June by selling part of a stake it held in London-based Barclays. Then last moth, Qatar’s sovereign wealth fund, the British bank’s top shareholder, unloaded a stake worth about $2.25 billion.

Barclays turned to investors from Abu Dhabi and Qatar last November for a total injection of up to $12 billion to shore up its balance sheet rather than take on the British government as a major shareholder.

Just Posted

Shipping oil by rail questioned

Red Deer-area mayors respond

Country star Gord Bamford and The Reclaws perform free Games concert Friday

Show starts at 6:30 p.m. in heated dome off Celebration Plaza in downtown Red Deer

Survey looks at social isolation among older men

Partnership between Red Deer College and Golden Circle Resource Centre

Peruvian brothers travel nearly 8,000 km to volunteer at Canada Winter Games in Red Deer

Italo and Mirko Del Castillo say Canadian warmth contrasts with twinter cold

Pride Days celebrated for first time at Canada Winter Games on Feb. 21 and 28

Pride Days are another first for Red Deer’s 2019 Canada Winter Games.… Continue reading

Gardening: What are you planting in 2019?

What’s new in plants for 2019? Checking catalogues, greenhouses and stores will… Continue reading

Opinion: I spy another energy hypocrite

Talk about biting the hand that feeds you. The mittens provided to… Continue reading

Canada’s bobsleigh team races World Cup on Calgary home track facing closure

CALGARY — Canada’s skeleton and bobsled teams will race a World Cup… Continue reading

Italy becomes ninth international football league to join forces with CFL

TORONTO — Add Italy to the growing list of international football federations… Continue reading

Toronto Defiant Overwatch academy team to be known as the Montreal Rebellion

MONTREAL — The Toronto Defiant’s Overwatch academy team will be known as… Continue reading

Canadian fashion and design insiders recall Karl Lagerfeld’s charm, ingenuity

TORONTO — Several Canadian fashion and design experts who knew couture icon… Continue reading

Millennial Money: Make your funds move at the speed of life

Change is constant — especially when you’re young. Chances are you’ll cycle… Continue reading

TSB says improved tankers involved in Manitoba derailment that spilled crude

ST. LAZARE, Man. — Federal investigators say CN rail cars that spilled… Continue reading

Most Read