DUBAI, United Arab Emirates - Kuwait’s sovereign wealth fund has booked a profit of $1.1 billion by selling the stake it took in Citigroup Inc. less than two years ago, when the banking giant was strapped for cash.
The Kuwait Investment Authority said yesterday that it sold the preferred shares after converting them to common stock for $4.1 billion. That works out to a gain of nearly 37 percent on its $3 billion investment.
Calls to the Kuwait fund for further details went unanswered. A Citi spokesman declined to comment.
Gulf Arab nations’ sovereign wealth funds have been heavy investors in US and European companies, using their oil wealth to buy large stakes in companies ranging from Citi to Germany’s Volkswagen AG and Mercedes-Benz parent Daimler AG.
The KIA joined other big investors - including the Government of Singapore Investment Corp. and longtime shareholder Prince Alwaleed bin Talal of Saudi Arabia - in pumping some $12.5 billion into New York-based Citi in January 2008. At the time, the bank was reeling from a huge drop in the value of its mortgage holdings.
At the same time it made its Citi investment, the fund took a $2 billion stake in Merrill Lynch, which also needed cash as a result of the credit crisis.
Merrill was later bought by Bank of America Corp., which last week surprised investors by paying back $45 billion in federal bailout money.
Analysts say that move puts pressure on Citi and other banks that tapped US government aid to follow suit, even though they still could face further losses as consumers struggle to pay their bills.
The Kuwait fund’s move came as a surprise. In September, it said it had no intention of selling its holdings in either Citi or Bank of America in the short term.
Kuwait took its stake in Citi last year after another Gulf fund, the Abu Dhabi Investment Authority, paid $7.5 billion for a 4.9 percent stake in the company. ADIA’s holdings, known as equity units, will begin to convert into ordinary shares starting in March of next year.