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BUSINESS BEAT: As Citi grabs $20 bln US bailout, officials say Egypt operations unaffected - Daily News Egypt

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BUSINESS BEAT: As Citi grabs $20 bln US bailout, officials say Egypt operations unaffected

CAIRO: When it was announced this fall that venerable investment bank Lehman Brothers was going under, the parlor games began. Many wondered who would be next. Citi was an oft-discussed name but most experts contended that Citi was too much a behemoth to ever sink. Then last week rolled around, and doubts were renewed. Citi’s …


CAIRO: When it was announced this fall that venerable investment bank Lehman Brothers was going under, the parlor games began. Many wondered who would be next.

Citi was an oft-discussed name but most experts contended that Citi was too much a behemoth to ever sink. Then last week rolled around, and doubts were renewed. Citi’s stock took a pummeling and many wondered whether the banking giant would survive.

But this week, as it has done with several other firms since the summer, the US Federal Reserve offered Citi a substantial bailout package to help it weather the current storm.

The government decided this weekend to hand Citi a cash package of $20 billion. The Fed has also agreed to extend $306 billion in loan guarantees.

They are receiving all this, plus the $25 billion already offered to them under the first phase of the bailout plan.

Experts have long predicted that the government would never let Citi fail. Many believe Lehman Brothers, for example, was allowed to tank because regulators thought its failure would not result in the demise of the entire economy.

While that judgment is arguable, there is little doubt that Citi’s massive reach meant that the health of the economy rested on the bank’s solvency.

In addition to injecting Citi with liquidity, the US government has contractually offered to shield the bank from potentially devastating losses. In a release sent to Daily News Egypt this week, the bank noted that it would assume responsibility for the first $29 billion in losses but that the government would take on 90 percent of losses above that figure.

As turmoil swirls around Citi, though, the bank’s Egyptian operations appear to be thriving.

The bank’s tumult, noted Lamise Negm, public affairs officer for Citi in Egypt, “hasn’t affected us that we have had to change our tone.

Negm pointed out that, despite deep connections with the parent bank, Citi Egypt handles its books, for the most part, domestically. In this way, the bank is shielded from the credit and liquidity issues surrounding Citi International.

Despite independence from the troubled parent, Citi Egypt received word from the banks’ regional director, asking each country to reign in spending.

“We have been asked, said Negm, “to utilize and rationalize all our expenses.

Despite largely escaping the woes of the parent, Citi Egypt appears to have recognized that new economic conditions demand the ability to adapt.

“Due to the shortage of liquidity in the Egyptian economy, noted Negm, “we started having new products which will suit the Egyptian market.

For one, the bank has begun offering certificate interest rates, where the 8.3 percent or 8.5 percent interest rate is available to the investor immediately, versus after a certain term.

This, believe Citi executives, will help give Egypt the immediate injection of cash it needs.

Negm also believes that Citi has unique banking offers that make it attractive and allow it to persist in times like these.

Programs like Treasure Vision – which allows clients to check their information from various banks through one piece of software – and Paylink, through which clients can pay vendors electronically.

Citi’s division in Egypt has also decided not to back off its aggressive growth strategy. The bank is still expected to open six new branches within Egypt by next year.

To read the other stories in our bi-monthly special focus on Egypt s banking sector, click here:http://thedailynewsegypt.com/article.aspx?ArticleID=18082http://thedailynewsegypt.com/article.aspx?ArticleID=18081http://thedailynewsegypt.com/article.aspx?ArticleID=18080

Topics: FJP

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https://www.dailynewsegypt.com/2008/11/26/business-beat-as-citi-grabs-20-bln-us-bailout-officials-say-egypt-operations-unaffected/
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