Buildings including Citigroup's offices, left, the HSBC headquarters, centre, and Barclays headquarters, right, in the Canary Wharf financial district in London. Picture: BLOOMBERG/LUKE MACGREGOR
Buildings including Citigroup's offices, left, the HSBC headquarters, centre, and Barclays headquarters, right, in the Canary Wharf financial district in London. Picture: BLOOMBERG/LUKE MACGREGOR

London — Citigroup jumped in as a financier for a key Deutsche Bank shareholder after Bank of America dropped out to pare potential risks linked to the German lender’s stock rout, people with knowledge of the matter say.

Citigroup would finance a few hundred million euros for former Qatari prime minister Sheikh Hamad bin Jassim Al Thani’s margin loan after the value of his Deutsche Bank holding shrank, the people said, asking not to be named.

The rout in Deutsche Bank shares in recent weeks triggered a so-called "termination event" for the lender who had provided credit, backed by the stake, the people said.

While lenders frequently restructure loans to back clients during a market slump, Bank of America had opted to withdraw because of the perceived risk involved and their own lower appetite for losses, they said.

Representatives for Citigroup and Bank of America declined to comment, while spokesmen for Al Thani did not respond. The financing from Citigroup for Al Thani is for part of his loan.

Bank of America has become more selective on both advisory and financing deals after incurring about $300m in losses tied to the December collapse of South African furniture retailer Steinhoff International, the people said.

The decision to pull out from the Qatari loan was due to the risks tied to the German asset rather than the client and the US bank continued to advise on deals and offer loans in the Middle East, the people said.

Shares of Deutsche Bank have plunged 39% in 2018 amid investors’ concerns that multiple turnaround plans and CEOs have failed to deliver revenue that justifies expenses, prompting downgrades to credit ratings and raising funding costs.

A strategic overhaul announced in April — paring businesses to improve profitability — should eventually turn things around, Deutsche Bank chief financial officer James von Moltke said in June. A Deutsche Bank representative declined to comment.

Citigroup meanwhile is making a renewed push into the Middle East, re-entering Saudi Arabia in 2017 after a 13-year hiatus. Investment banks in the region are walking a tightrope after tensions between neighbouring countries resulted in Saudi Arabia and its Arab allies in 2017 placing a trade embargo on Qatar. The rift forced Qatar to shift import routes to Kuwait and Oman, and buy goods from Iran and Turkey.

A group of US banks collectively lost more than $1bn after Steinhoff’s account-ing scandal.

Citigroup took the biggest hit, with losses and charge-offs of $370m.

Bloomberg

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