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Citigroup (C) in Discussion for Saudi Arabia Banking License

Zacks Equity Research

More than a decade after withdrawing its operations from Saudi Arabia, Citigroup Inc. C is making efforts to re-enter the region.  The New York-based bank is currently in discussions for acquiring a banking license in Saudi Arabia, as it is trying to capitalize on the country’s financial reforms.

Per people familiar with the matter, Citigroup’s Chief Operating Officer for the Middle East and Africa, and a senior private banker of the firm’s operations are involved in discussions with the Saudi Arabian regulators.

Though the company is optimistic about receiving the license, it is apprehensive that the talks could fail at the last stage.  Without a license from the Capital Market Authority (CMA) – the regulatory body in Saudi Arabia for applying for full financial, legal, and administrative independence – international banks face hurdles on working on deals signed in the country.

In 2004, as part of Citigroup’s strategy to focus on countries where they could control a majority stake, the bank sold its 20% stake in Samba Financial Group to Saudi Arabia’s Public Investment Fund for $760 million. Hence, the company lost a key banking license, putting pressure on the bank’s activities in the country.

In 2015, the company won a license to trade in Saudi equities, while last year it played an important role of being the leading advisor on the country’s first international bond sale. Further, Citigroup has provided more finance to the borrowers in the country as compared with other banks like JPMorgan Chase & Co. JPM and Deutsche Bank AG DB, who have operations there.

Per the Citigroup officials, the bank now has excess capital and Saudi Arabia’s plans to boost, restructure and privatize their economy, will prove beneficial. After the Saudi economy opened up for Foreign Direct Investments in Jun 2015, the bank has been directly investing in companies listed on Saudi stock exchange.

Shares of Citigroup gained 7.4% over the last three months; underperforming the 8.5% gain for the Zacks categorized Major Regional Banks.

Currently, this stock carries a Zacks Rank #3 (Hold).

A better-ranked stock in the same industry is Bank of America Corp. BAC. The company has witnessed an upward earnings estimate revision of 6% for the current year in the past 60 days. Its share price has been up 88.89% for the past one year. This stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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