Prince Alwaleed bin Talal said Monday he has no plans to sell shares in US banking giant Citigroup Inc. Alwaleed added the bank's decision to exit TARP was “prudent”. Alwaleed invested in Citigroup through Kingdom Holding in 1991 with an ownership of 3.6 percent and in January 2008 participated in a $12.5 billion private offering of convertible preferred securities of Citigroup, Kingdom Holding said in the statement. He said in a statement that he supports Chief Executive Vikram Pandit and that Citi's plans to repay the US government gives the lender “more certainty as to how they will conduct their business profitably.” Gulf investors have recently sold Citi stakes. Kuwait Investment Authority this month said it off-loaded its holdings in the company. Citigroup announced plans Monday to repay $20 billion in government aid in a big step toward emerging from a massive bailout. Citi, which was kept afloat by a series of state rescues during the financial crisis, said it would sell $20.5 billion in new securities under the plan. The proceeds will be used to buy back the preferred shares held by the US Treasury under the Troubled Asset Relief Program. The plan also calls for the Treasury to sell $5 billion of the common stock held in Citi and “to sell the remainder of its shares in an orderly fashion over the next six to 12 months,” a Citigroup statement said. The rescue of Citigroup was the most extensive for the US banks hit by the financial crisis last year. The government injected a total of $45 billion in the firm, once the world's biggest banking group. It converted a portion of that to common stock earlier this year in exchange for a stake of around 34 percent in Citi. The agreement also calls for an end to additional state guarantees to Citi in a so-called loss-sharing agreement. “We are pleased to be able to repay the US government's trust preferred securities and to terminate the loss-sharing agreement,” said Citigroup chief executive Vikram Pandit. “We owe the American taxpayers a debt of gratitude and recognize our obligation to support the economic recovery through lending and assistance to homeowners and other borrowers in need.” Citi had to get approval from the Treasury, which injected over $300 billion into banks in an effort to stabilize the financial system and keep credit flowing. “We are pleased that Citigroup is moving ahead with plans to pay the taxpayers back,” the Treasury said in a statement. “Treasury has repeatedly stated that the United States never intended to be a long-term shareholder in private companies. As banks replace Treasury investments with private capital, confidence in the financial system increases, government's unprecedented involvement in the private sector diminishes, and taxpayers are made whole.” The Treasury statement added: “While much work lies ahead to improve lending and spur job creation, today's announcement by Citigroup takes us another step in the right direction.” Citi said the repayment to the Treasury would result in a pretax loss of some eight billion dollars, but would save the firm 1.7 billion dollars a year in interest on the securities. The end of the state guarantee will result a loss of $2.1 billion, offset in part by annual savings of $500 million. “As I have stated many times over the past year, we planned to exit TARP only when we were convinced that it was prudent to do so,” Pandit said. “By any measure of financial strength, Citi is among the strongest banks in the industry, and we are in a position to support the economic recovery.” Bank of America Corp. exited the program last week after paying back $45 billion of rescue funds. “It's great news,” Gary Townsend, chief executive officer of Hill-Townsend Capital, an investment firm in Chevy Chase, Maryland, said “it's important for Citi to exit these extraordinary agreements with the US Treasury. The bank will sell $17 billion of common stock, with a so- called over-allotment option of $2.55 billion, and $3.5 billion of “tangible equity units.” The US Treasury will sell as much as $5 billion of common stock it holds, with plans to unload the rest of its stake during the next six to 12 months.
