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Citi's Billionaire Saudi Investor Pledges 'Business as Usual' After Arrest

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Kingdom Holding Co., the firm controlled by arrested Saudi Prince Alwaleed bin Talal, says it will continue normal operations of its business, which owns stock in a number of U.S. firms including Wall Street lender Citigroup ( C - Get Report) .

Prince Alwaleed's arrest, along with at least 10 other members of the royal family, was announced Saturday night, according to the New York Times and other outlets. It came amid a corruption probe instigated by Crown Prince Mohammed bin Salman, a son and top adviser of King Salman, and seemed designed to further consolidate the 32-year-old's power, the Times reported.

The arrest immediately raised questions among investors about its effect on Prince Alwaleed's various stock holdings, which his firm is attempting to address.

"Our company's successful strategy remains intact, and I look forward to advancing our business," CEO Talal Ibrahim al Maiman said in a statement. "The support of the government of the kingdom of Saudi Arabia to Kingdom Holding is a badge of honor for us."

Citigroup, in which Kingdom Holding has a preferred stake of undisclosed size, has been among the firm's most consistently successful investments, according to its website.

Saudi Prince Alwaleed Bin Talal.

A Citigroup spokesman declined to comment. The New York-based company's shares fell 0.9% to $73.37 in U.S. trading early Monday.

Prince Alwaleed acquired the Citi stake in 1991 at a time when predecessor Citicorp had encountered financial difficulties that enabled him to buy a "significant amount" of shares at a discount. Kingdom then reaped the benefits of the bank's expansion, which included the purchase of Salomon Brothers massive trading desk.

Citigroup shares could face downward pressure if Price Alwaleed is forced to sell his stake, longtime bank analyst Dick Bove of Vertical Group said in a telephone interview.

"He may be forced to come up with money, and that could force him to sell portions of his portfolio," Bove said. "That would create a short-term pressure on Citigroup stock."

There's also a risk that Citigroup might lose out on lucrative banking business in the country as the crown prince moves ahead with an initial public offering of the national oil company, Aramco, and a recently-unveiled plan to develop a new $500 billion city on the Red Sea coast.

Citigroup announced in April that it had won a Saudi banking license, allowing the company to return to the country after pulling out in the 2000s.

The prince was probably a "lead for Citigroup in getting business in Saudi Arabia, so to the degree that he's going to be shut down, you might see Citigroup in the penalty box for a while," Bove said. "What they could lose is the ability to participate in the expansion of the nation if this crown prince's program is effective."

Citi, like other U.S. banks, has benefited this year from speculation that President Donald Trump and a Republican Congress would loosen regulations tightened in the aftermath of the 2008 financial crisis as well as cut taxes.

Its shares have climbed 47% since Trump's November 2016 election victory, twice the gains of the S&P 500, even though Congress has yet to deliver on any of the major changes that its members promised. The House outlined a menu of corporate-rate reductions last week that it hopes can pass both chambers before the end of the year.

Citi's operating environment remains "largely positive," CEO Mike Corbat told investors on an earnings call in mid-October. While tax cuts remain a question, Corbat said he liked the administration's tack of adjusting regulations to boost growth rather than repealing them altogether.


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