Identifier
Created
Classification
Origin
07ALGIERS1638
2007-11-11 11:33:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Algiers
Cable title:  

THE HIGH STAKES OF CITIBANK'S CPA BID

Tags:  ECON EINV EFIN PREL AG 
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DE RUEHAS #1638/01 3151133
ZNR UUUUU ZZH
P 111133Z NOV 07
FM AMEMBASSY ALGIERS
TO RUEHC/SECSTATE WASHDC PRIORITY 4831
INFO RUEHMD/AMEMBASSY MADRID 8677
RUEHFR/AMEMBASSY PARIS 2402
RUEHRB/AMEMBASSY RABAT 2009
RUEHTU/AMEMBASSY TUNIS 6861
RUEHTRO/AMEMBASSY TRIPOLI
RUEHNK/AMEMBASSY NOUAKCHOTT 6095
RUEHNM/AMEMBASSY NIAMEY 1348
RUEHBP/AMEMBASSY BAMAKO 0297
RUEHCL/AMCONSUL CASABLANCA 3121
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS SECTION 01 OF 02 ALGIERS 001638 

SIPDIS

SENSITIVE

SIPDIS

CASABLANCA FOR USFCS RORTIZ
CAIRO FOR TREAS ASEVERENS
COMMERCE PASS TO JREITZE

E.O. 12958: N/A
TAGS: ECON EINV EFIN PREL AG
SUBJECT: THE HIGH STAKES OF CITIBANK'S CPA BID


SENSITIVE BUT UNCLASSIFIED -- NOT FOR INTERNET DISTRIBUTION.

UNCLAS SECTION 01 OF 02 ALGIERS 001638

SIPDIS

SENSITIVE

SIPDIS

CASABLANCA FOR USFCS RORTIZ
CAIRO FOR TREAS ASEVERENS
COMMERCE PASS TO JREITZE

E.O. 12958: N/A
TAGS: ECON EINV EFIN PREL AG
SUBJECT: THE HIGH STAKES OF CITIBANK'S CPA BID


SENSITIVE BUT UNCLASSIFIED -- NOT FOR INTERNET DISTRIBUTION.


1. (SBU) SUMMARY: Citibank is the sole American bank bidding
on the privatization of the state-owned bank Credit Populaire
d'Algerie (CPA). Competition is considered stiffest from
the two leading French banks, Societe General and BNP.
Citibank may find itself disadvantaged by its recent
announcement of a massive reduction in profits and the
resulting turmoil over the company's leadership, and there
is a chance that these factors may cause Citibank to pull out
of the Algerian bid altogether. Meanwhile, a recent Algerian
government rule change may delay the bidding process by
another quarter or more. We expect continued aggressive
advocacy by the French government, including President
Sarkozy in person when he visits in December. If Citibank
remains in the running, we recommend strong USG support and
advocacy on its behalf. END SUMMARY.

A KEY MOMENT FOR ECONOMIC REFORM IN ALGERIA
--------------


2. (U) CPA is one of five state-owned banks in Algeria (which
control 95 percent of the country's banking sector),and the
first of three slated for privatization. With a 13-percent
domestic market share, CPA is the fourth-largest bank in
Algeria by both net income and assets, with total assets
reaching almost six billion dollars in 2005. Given its
customer base of 770,000 and its 140 branches, CPA is
considered to be a strategic purchase by the leading foreign
banks interested in quickly expanding their presence and
holdings across Algeria. By all accounts, Citibank is facing
stiff competition from the French in its bid to buy a
51-percent interest in CPA.


3. (U) Citibank is the only American institution of the six
banks short-listed to bid on CPA, and most agree that its
main rivals are the French firms BNP Paribas (BNP) and
Societe Generale (SocGen),both of whom have been expanding
in Algeria since 2006. The first phase of the bidding
process -- submission of technical offers -- is currently
scheduled to close sometime around November 20. Bidders

whose submissions receive a score of 80 or higher will then
be invited to submit financial offers, which will reveal
their offering price for the bank.

THE BUMPY ROAD THUS FAR
--------------


4. (SBU) The bidding process has already been delayed since
February, and news reports indicate that a recent rule change
allowing state-owned enterprises to use private banks for the
first time since 2004 (septel) will cause the bidding to be
delayed again until the first half of 2008. We believe the
Algerians want the bidders to re-evaluate CPA and adjust
their offers upward in light of the rule change, which will
allow CPA to retain its parastatal customers even after
privatization. Citibank's Managing Director for Algeria,
Kamel Driss, told us in early November that he in concerned
that the GOA may consider his firm's recent $5.9 billion
write down and resulting profit slides, along with the
subsequent resignation of its CEO, as weakening its CPA bid.
He stressed that all major banks, including Citibank's
French competitors, are faced with the same problems
associated with sub-prime loans. However, Driss also said
that prior to its leadership shakeup, Citibank senior
management had been distracted by the bank's sub-prime
dilemma and drop in share price. He said that company
executives recently met in New York specifically to review
the CPA proposal, in part because Citibank's former CEO was
often accused by his detractors of expanding the bank's
international operations too quickly.

FRENCH INFLUENCE REMAINS STRONG
--------------


ALGIERS 00001638 002 OF 002



5. (U) We have received reports from numerous sources that
the French government is lobbying hard for both BNP and
SocGen. Jamel Djerad, an Algerian consultant and chief of
staff to the Algerian prime minister during the late 1980s
and early 90s, told us that SocGen remains interested in
buying BNP and, with that potential merger in mind, French
officials and influential citizens feel free to lobby for
either bank in order to ultimately reach the same result.
Djerad added, however, that SocGen has stronger support than
BNP among the French elite and power base, including
President Sarkozy, who is expected to advocate for the French
banks during his state visit to Algeria in early December.
Djerad asserted that key Algerian government players favor
SocGen, and noted that the bank's development director
frequently flies to Algiers by private jet -- a luxury highly
restricted by the Algerians -- to meet with President
Bouteflika. He also expected, however, that a delay in the
bidding was likely because of an ongoing disagreement between
President Bouteflika and other power brokers over whether
sale of CPA would be better accepted publicly and better
serve the privatization process if the buyer were an American
or French firm.

CITIBANK'S OFFER
--------------


6. (SBU) With this privatization, the Algerian government
expects new investments in banking technology, expanded
banking services to the public, creation of new jobs, and the
recovery of outstanding credit on non-performing loans. In
its technical offer, Citibank will stress its experience in
acquiring over 100 firms in the last five years, its
provision of English-language technical training, and its
record of using the process to offer a full range of consumer
financial products and high quality training to the employees
of the acquired firm. Citibank's technical offer will
include assistance in forming a credit bureau in order to
improve risk analysis, governance and banking controls.
Citibank also says it will expand consumer banking and
lending for small to medium-sized enterprises (SME). In the
end, Citibank is counting on its track record of being the
only foreign bank willing to invest and lend in Algeria
during the years of terrorism in the 1990s, together with the
fact that it is the largest foreign and private bank in
Algeria in terms of assets.

COMMENT: MORE THAN JUST A BANK
--------------


7. (SBU) We feel strongly that the USG should support and
advocate for Citibank's CPA bid not only because it is the
sole U.S. company in the running, but because a
Citibank-owned CPA would significantly advance our goals of
economic and financial reform in Algeria. With such an
acquisition, Citibank would be able to inject a level of
professionalism, transparency and best practices into a
significant portion of the banking sector across Algeria.
Further, its stated goal of SME development and its offers of
technical assistance with credit risk analysis and banking
controls would support the ongoing programming of the
Departments of State, Treasury and Commerce. Lastly, given
that Citibank's in-house language is English, an expanded
Citibank workforce in Algeria, especially in the financial
sector, would leverage the English-language programming that
the Algerian government frequently asks us to provide.
DAUGHTON