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Kuwait sells Citi stake, makes $1.1 bln profit

Kuwait Investment Authority (KIA) transferred the preferred stock it owned in Citigroup to common shares and sold all of them for $4.1 billion, KIA said in a statement.

KIA said it made a 37 percent return on its initial January 2008 investment of $3 billion in Citigroup’s preferred stock.

It did not disclose the number of shares it had sold or what it planned to do with proceeds from the sale. Citigroup’s stock closed at $4.12 on the New York Stock Exchange on Friday.

KIA follows Singapore’s wealth fund, GIC, which halved its stake in Citigroup in September, cashing in on a market rally for a profit of $1.6 billion.

The situation in the United States was better than before, and so investors could “pull back their money,” said Naser al-Nafisi, general manager for Al Joman Center for Economic Consultancy in Kuwait.

Citigroup’s stock, which fell as low as 97 cents in March, has since more than quadrupled, and it may be slowly regaining favor among investors.

In a November regulatory filing, hedge fund billionaire John Paulson’s firm revealed that it had taken a stake in Citigroup. Paulson & Co had bet that financial services companies would tumble last year.

Still, some investors may not be as lucky. Common shares of Citigroup, which has posted more than $100 billion of write-downs and consumer credit losses since the credit crisis began, have lost about 85 percent of their value since the KIA investment in January 2008.

Saudi-based Kingdom Holding, controlled by billionaire Prince Alwaleed bin Talal, is also a large Citigroup shareholder.

Citigroup has also been urging the U.S. government to sell the 34 percent stake it owns in the bank, Bloomberg reported. But the government does not intend to do so until the bank and its regulators agree on an overall plan on how to repay taxpayers after last year’s $45 billion bailout, the news agency said.

Separately, the Financial Times reported the government was willing to sell at least some of its shares along with a capital-raising effort by Citigroup.

Under fire

Kuwait’s sovereign wealth fund, which manages state assets in the world’s fourth-biggest oil exporter, has come under fire from some parliamentarians for investing $5 billion in Citigroup and Merrill Lynch. Merrill Lynch was since bought by Bank of America

The value of foreign assets managed by KIA fell by about 9 billion dinars ($31.58 billion) in the nine months to December 2008, due to the financial crisis, two lawmakers said in February after a government briefing. KIA managed assets worth about 49 billion dinars at Dec. 31, the MPs said.

Since October 2008, KIA has reduced the exposure of its key Future Generation fund to global equities markets, shifting assets to cash funds, the government said in January.

In May, Finance Minister Mustapha Al Shamali told Reuters that the Gulf state was not reducing its dollar assets and was keeping some liquid assets to meet its budget requirements.