RIYADH, 16 September 2003 — The announcement by Citigroup that it would withdraw from the management of the Saudi American Bank by the end of October is seen as a strategic move by SAMBA’s foreign partner to capitalize on its vast experience of the Saudi market which it will be able to enter directly once the Kingdom joins the World Trade Organization. Nonetheless the news had a negative impact on the Saudi share market which fell 3.5 percent in the morning session.
SAMBA’s share prices have fallen by three percent during the past 24 hours, while other banks, as well as STC and the Saudi Electricity Company, also experienced a downturn.
Insiders described the trend as part of the market correction resulting from the Citigroup’s decision to hand over management control to SAMBA which reiterated its commitment to its shareholders.
According to Motashar T. Al-Murshed, financial consultant, the Citigroup’s action is of strategic importance. He said it was much more than merely haggling over the terms of the management contract as the Arabic press reported. The move should be viewed in the context of the Kingdom’s bid for accession to the WTO. If that happens, Citigroup would be free to make a direct entry into the banking sector with which it is completely familiar.
Motashar said the Saudi Arabian Monetary Agency should rule that foreign banks with links to local banks are not allowed into the Kingdom for at least five years. This would enable SAMA to safeguard the commercial interests of local banks.
Motashar said the downtrend indicates the cautious move of shareholders to sell off stocks in anticipation of profit-taking.
He added that the market would stabilize once third quarter results are announced and new players had been brought into the market.