Perhaps Citi should have slept on Dubai. A year and a half ago, Citigroup became the first U.S. bank to relocate one of its rising stars, Alberto Verme, an investment banking executive, to the booming gulf-coast state. At the time, Citi's CEO Vikram Pandit said the move was a sign that the bank was "convinced of the region's long-term and immense growth opportunities."
It turned out to be a much shorter growth opportunity than Pandit and Citi thought. A few months ago, Verme, stripped of his title as co-head of investment banking, was relocated to London. Mohammed al-Shroogi, who headed Citi's United Arab Emirates operations, left in September. Late November, Dubai World, which is a for-profit development company controlled by the ruling family of the gulf state, indicated it may have to default on a portion of its $60 billion in loans. The rush to Dubai has left Citi on the hook for billions of dollars of losses in the financially troubled gulf state. According to research firm Creditsights, Citi has made an estimated $5.9 billion in loans in the U.A.E., which includes Dubai as well as its oil-rich neighbor Abu Dhabi. Of that, $1.9 billion was made to Dubai World. In the end, it might not lose that much. On Monday, Abu Dhabi said it would provide $10 billion in financing to help Dubai pay off its debts.
Also, to be sure, Citi's potential losses in Dubai are not enough to bring down the bank. Citi has $2 trillion in assets. And the Dubai losses look puny compared to huge hits the bank took in subprime lending and the mortgage market in general. But Citi was far more aggressive in courting Dubai business and left itself open to far more losses in what now appears clear was a financial house of cards than any other U.S. bank. JPMorgan, the U.S. bank with the next highest loan exposure to Dubai, has $2.5 billion in loans outstanding in the U.A.E., less than half of what Citi may have to write off.
Read more: http://www.time.com/time/business/article/0,8599,1947652,00.html#ixzz0ZlIT5MKZ
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