Citi’s ties to Saudi royal family to remain intact after Khashoggi link

Citi's new CEO Jane Fraser took the helm on Monday

Citigroup has no plans to alter its longstanding business ties with the Saudi royal family amid new government reports that its Crown Prince Mohammed bin Salman was involved in the 2018 murder of journalist Jamal Khashoggi, FOX Business has learned.

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Among all the major large banks, Citigroup has some of the deepest business relationships with the Kingdom and its massive business empire that includes petroleum production and more recently a move into other businesses such as technology..

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But even with new CEO Jane Fraser taking over the bank just this week, Citi will maintain those ties, according to people close to the company.

With a market capitalization of nearly $145 billion, Citigroup is the nation's fourth-largest bank behind Wells Fargo, Bank of America, and industry leader JP Morgan. A company spokeswoman would not deny Citi will continue its close relationship with the Saudis.

Analysts say Citi can't afford to give up the relationship with the Saudi's given its relatively weak financial condition compared to the other big banks. Citi has a 6% return on equity (ROE), nearly half of JP Morgan's 11% ROE, earning $12 billion in the fourth quarter of 2020 compared to Citi's $4.6 billion.

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Citi shares are trailing rivals this year with a gain of 11%, compared to JP Morgan’s 18% rise and Wells Fargo’s 23% jump.

It's unclear exactly how much money Citigroup earns from its dealings with the Saudis but analysts say it's substantial. The royal family is among the richest monarchies in the world with an estimated net worth of $1.4 trillion. It's also a key member of the Organization of the Petroleum Exporting Countries -- known as OPEC -- that plays a significant role in setting global oil prices which have rebounded this year trading above the $60 per barrel level.

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Citigroup’s ties to the royal family are both deep and longstanding. Saudi Prince Al Waleed bin Talal was at one point Citi’s biggest investor, helping the bank stay afloat by increasing his stake in the bank during the 2008 financial crisis that nearly pushed Citi into insolvency. It’s unclear how large bin Talal’s stake is at present.

Citi has sought to grow its presence and offerings in Saudi Arabia since it obtained a capital markets license from the nation in 2018. This past summer, the head of Citi’s operations in Europe, the Middle East, and Africa, David Livingston addressed Citi’s plans at the bank’s webinar conference entitled, “Navigating the Future: What’s next in a post-covid world?” Livingston said the bank was looking to increase engagement in the Saudi’s financial sector, not decreasing it even as questions continued to swirl about bin Salman's role in the killing of Khashoggi, a Washington Post columnist and a vocal critic of the Saudi royal family.

Citi was one of the first banks hired as Saudi reopened to foreign investment in 2018 —working on a deal that took a Saudi airline public. It was also among the consortium of banks that helped Saudi’s oil giant Aramco go public in 2019. 

“We’ve enjoyed a very productive relationship with the Kingdom of Saudi Arabia for many years. Among many transactions and services provided over the years, we were part of the sovereign syndicated loan in 2016, and of course, the very successful inaugural sovereign bond issue and the Sukuk offering in 2017,” former Citi Middle East chief Jim Cowles told Arab News in 2018. Sukuk is Arabic for a type of bond that is constructed to comply with Sharia law.

Now, Citigroup management appears unswayed by this week's intelligence report released by the Biden administration that the crown prince -- considered the heir apparent to the throne occupied by his father King Salman, -- ordered the 2018 killing of Khashoggi.

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“Citi won’t walk away from being paymaster for OPEC," said  Chris Whalen, chairman of Whalen Global Advisors and a veteran bank analyst. “Citi, like all banks, will finesse doing business with the Sauds.”

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Citigroup, of course, isn’t alone among big financial firms tied to the Saudis even after Khashoggi's murder. Money management powerhouse BlackRock and white-shoe investment bank Goldman Sachs all continue to do business with the Saudis while embracing social justice issues at home. Observers say the money is just too good to pass up.

Goldman declined to comment. BlackRock shared a statement its CEO Larry Fink issued two years ago, where he described the Khashoggi murder as "horrifying," but added that "economic integration and diversification will help Saudi Arabia build a more modern and sustainable economy and society for all of its citizens."