Saudi prince ups stake in US banking giant

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UPPING STAKE: Saudi Prince Alwaleed bin Talal is planning to increase his stake in Citigroup to five percent . (Getty Images)

Citigroup Inc won a vote of confidence from Saudi Prince Alwaleed bin Talal, its largest individual investor, who said on Thursday he plans to boost his stake in the US banking giant to five percent from less than four percent.

Shares of Citigroup rose 21 cents to $6.61 in premarket trading following the news.

In a statement, Alwaleed said he believes the shares are "dramatically undervalued" following a nearly 90 percent plunge since late 2006. Citigroup's market value was $34.9 billion on Wednesday, meaning that Alwaleed plans to invest at least $349 million, based on Wednesday's closing price.

Alwaleed expressed "full and complete support to Citi management," including embattled Chief Executive Vikram Pandit.

He said the New York-based bank is "taking all the necessary steps to position the company to withstand the challenges facing the banking industry and the global economy."

Alwaleed added that he is "fully confident that Citigroup's universal banking model and global franchise will make it a long-term winner in the financial services industry."

The prince's percentage stake in the bank was reduced in late 2007 and early 2008 as Citigroup raised some $50 billion of capital from sovereign wealth funds and other investors, including Alwaleed, to shore up its balance sheet. It recently received another $25 billion under the US government's bank bailout package.

Shares of Citigroup have fallen 78 percent this year. They lost one-third of their value in the first three days of this week as investors worried that Pandit's plan to cut expenses by 20 percent and eliminate 52,000 jobs won't restore the bank to health.

Citigroup has lost $20.3 billion in the last year and taken tens of billions of dollars of writedowns on mortgage and other toxic debt. Analysts expect it to lose money in the fourth quarter, and some don't expect it to be profitable in 2009. (Reuters)

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