Prince Alwaleed Bin Talal, a major investor in Citigroup (NYSE: C), urged the U.S. federal government to sell its ownership stake in Citigroup as soon as possible in order to boost investor confidence.
Alwaleed made the statement in a recent interview with Emeging Markets magazine. “The earlier the U.S. government exits its investments in those companies, the better,” as long as the withdrawal is not done in a manner that hurts the prices of U.S. financial stocks, the Saudi billionaire was quoted as saying in an interview published on Sunday.
Alwaleed continued, “We need to give confidence back to the shareholders and investors that these companies are moving along without government support.”
After Citigroup received a series of cash injections during the financial crisis, the U.S. federal government ended up with a 34% stake in Citigroup, after the bank received $45 billion in funds from the government’s Troubled Asset Relief Program (TARP).
Anonymous sources have reported that Citigroup has been in talks with officials from the Treasury department about how the government should wind-down its ownership of the 7.7 billion shares in the bank.
Alwaleed currently owns a part of Citigroup through his investment firm Kingdom Holding Co. As of July of 2007, Kingdom owned a 3.6% stake in the company. Alwaleed was one of the investors who agreed to invest more money into the bank in December of 2007.
Citibank is expected to turn a profit on an operational basis sometime next year, according to Alwaleed. “Citigroup has learned a huge lesson. The worst is behind them right now,” Alwaleed said, adding that the bank’s $100 billion of tangible common equity, “the highest in the industry,” and the large scope of its operations meant its future was “very bright.”
Citibank has been profitable during the last two quarters because of one-time gains from sales of parts of its businesses and other accounting items, but has not posted a quarterly profit from its primary operations since 2007.
As a result of the financial crisis, some regulators have discussed the issue of banks becoming too large to fail, since the collapse of one major institution could undermine the country’s banking system, leaving governments forced to spend huge sums of money to support unprofitable banks,
Alwaleed stated that he didn’t believe breaking up major banks was a solution to that problem and that he did not expect the U.S. government to pursue that route. “Any failure of a broken-up bank is still going to impact the whole system. You need to fix the problem, not a symptom of the problem.”