GIC makes $1.6bn from Citi stake sale

Singapore's sovereign wealth fund has pocketed a $1.6bn profit after selling half of the 9 per cent stake in Citigroup it acquired during this year's US-government led refinancing of the troubled bank.

In an unexpected announcement on Tuesday, the Government of Singapore Investment Corporation said that the sale followed the conversion, on 11 September, of its $6.8bn of convertible preferred stock for Citigroup common stock at $3.25 a share.

Ng Kok Song, GIC's chief investment officer, said the fund also held an unrealised gain of $1.6bn, giving it a total profit of $3.2bn on its participation in the rescue, which was announced in February.

Citigroup shares closed at at $4.43 on Monday in New York , having fallen back this month after a strong rally in August when the stock price nearly doubled. In pre-market trading on Tuesday the shares 2.5 per cent higher at $4.54.

The sale by such a key strategic investor suggests that GIC is bearish about the outlook for leading banks and that it moved to take advantage of a recent rally in global stocks. However, sentiment surrounding Citigroup could be boosted because GIC has decided not to sell its entire holding.

GIC, which is thought to have assets of about $300bn, stressed that it retained confidence in Citigroup's future operations.

"A stake below 5 per cent reflects GIC's goals and desire to be a portfolio investor," it said. "GIC will continue its investment in Citigroup as we are confident of its long-term prospects."

GIC invested a total of $18bn in Citigroup and UBS, the Swiss bank, when the duo sought financing in the wake of writedowns on sub-prime mortgages. Shares in both banks fell heavily in subsequent months, prompting criticisms of GIC's investment timing.

The fund also has a holding of about 6 per cent in UBS, but did not participate in a SFr15bn fundraising earlier this year.

Lee Kuan Yew, the former Singapore prime minister who chairs GIC, said in April last year that the fund planned to retain holdings in big western financial institutions such as Citigroup and UBS for up to 30 years.

GIC's profitable disposal of part of its holding in Citigroup contrasts sharply with significant losses incurred on sales of stakes in western financial groups by Temasek, the Singaporean state investment company that invests returns from state-owned assets.

Ακολουθήστε το Euro2day.gr στο Google News!Παρακολουθήστε τις εξελίξεις με την υπογραφη εγκυρότητας του Euro2day.gr

FOLLOW USΑκολουθήστε τη σελίδα του Euro2day.gr στο Linkedin

Temasek was estimated by analysts to have incurred a loss of between $2.3bn and $4.6bn on the sale of a 3.8 per cent holding in Bank of America, which attracted unusual public criticism in Singapore.

It is also thought to have incurred a loss on the sale of a stake of almost 2 per cent in Barclays, the UK bank, but has made no comment.

© The Financial Times Limited 2009. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation