Citi Needs More Than Prince to Avoid Pauper's Grave

Solaris does not own any shares of Citi.

Prince Alwaleed initially invested in Citi's predecessor, Citicorp, in 1991, coming to its rescue after the bank made some losing bets on U.S. real estate and Latin America. The initial investment was less than $600 million. The investment has made Prince Alwaleed billions of dollars, but the value of his holdings has fallen sharply over the past year as Citi has been hit hard by the credit crisis.

The stake owned by Prince Alwaleed declined over the past year as Citi raised more than $50 billion in private capital and received $25 billion from the U.S. government under its bank investment program. Prince Alwaleed holds the stake in Citi through his investment company Kingdom Holding Co.

A Citi spokeswoman declined to comment regarding the Prince Alwaleed announcement. Ghriskey says with the markets acting as they are, even a splitting of Citi, something long fought for by several shareholders, may not really serve any beneficial purpose.

"[W]e've only begun to see some signs of economic weakness and there is certainly more to come," he says. "The problem is nobody knows how much. If there is a deep and dark recession, a lot of the bets are off on a lot of these financials. One would think Citi would be a survivor in all that, but who knows."

After failing to complete a deal to purchase Wachovia (WB Quote) last month, the bank is setting its sights on smaller acquisitions and has had acquisition talks with Bethesda, Md.-based Chevy Chase Bank and Valley National Bank (VLY Quote). On Thursday Reuters reported that Citi is now one of several bidders for Chevy Chase Bank, along with JPMorgan Chase (JPM Quote) and Capital One (COF Quote).