Did Citigroup need the life raft?
Citigroup's $7.5 billion investment offer from the Abu Dhabi Investment Authority might have saved it from subprime trouble. Doug Krizner talks to Peter Thal-Larsen of the Financial Times in London about the deal.
Citigroup's headquarters in London. (Peter Macdiarmid / Getty Images)
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TEXT OF INTERVIEW
Doug Krizner: Citigroup's been a leaky boat since the subprime crisis. Multibillion-dollar write-downs for bad mortgage investments. Cost the CEO his job. There'd been talk of the bank cutting its dividend, maybe even selling off parts of the company. But last night, Citigroup was tossed a life-ring: a $7.5 billion investment from the Abu Dhabi Investment Authority.
Let's bring in Peter Thal-Larsen, he covers the banking industry for the Financial Times. Peter, how critical was this investment to the bank's survival?
Peter Thal-Larsen: There's been a lot of questions raised about Citi's capital base by analysts and investors and about the sustainability of their dividend. And Citi has constantly maintained over the past few months that they have enough capital that they'll be able to pay a dividend. But the fact that they're willing to go out and raise this amount of money at this price suggests that the capital position might have been a bit tighter than we thought.
Krizner: Now we know there have been cases where foreign investment and U.S. assets from Persian Gulf sovereign funds has created controversy. I'm thinking of Dubai Ports World. What's your sense of how this investment in Citigroup is going to play out with U.S. regulators?
Thal-Larsen: I'm sure the regulators will have a close look at this as they would to most of these investments. But I mean, you've got to bare in mind that, you know, Citigroup has had a large Middle Eastern investor since the early 1990's, when Prince Al-Walid took a big stake in what was then Citibank when it was in financial difficulty. So there's a track record here. And I think, also the other thing that's happened here, and we've seen this with other similar investments, like the Chinese investment in Blackstone, is that they've been very careful to present this as purely an economic interest, that Abu Dhabi will have no board representation or any direct influence over Citigroup. And really, people seem to be going quite a long length to structure this in such a way to say this is purely a financial transaction and we're not buying any kind of influence over these banks or financial companies.
Krizner: Peters Thal-Larsen covers the banking industry for the Financial Times in London. Thanks so much for speaking with us.
Thal-Larsen: You're welcome.
