Citigroup inks MoU with World Bank's IFC for $1.25 bln funding facility - Update

(RTTNews) - Financial services firm Citigroup Inc. (C) said Monday that it entered into a Memorandum of Understanding or MOU with the private sector arm of the World Bank Group, International Finance Corp. or IFC, to create a $1.25 billion funding facility. The funding facility is intended to drive trade growth in the emerging markets over a three-year period. This MOU is part of the $50 billion World Bank Group led initiative, the Global Trade Liquidity Program or GTLP, started in April 2009.

In a statement, IFC's executive vice president and chief executive officer, Lars Thunell said, "Global trade is facing serious challenges in today's financial environment, given the shortage of liquidity worldwide. This program benefits small businesses in developing countries, which are a major source of jobs and have been hard hit by the global financial crisis. We appreciate Citi's leadership and look forward to working with them on this key initiative."

IFC's Global Trade Liquidity Program, which began operations in April 2009, targets initial commitments of $5 billion from public sector sources, enabling it to support up to $50 billion of trade. The program will be a three-year initiative. It raises funds from international finance and development institutions, governments, and banks, and it works through global and regional banks to extend trade finance to importers and exporters in developing countries.

The Global Trade Liquidity Program is a unique coordinated global initiative that brings together governments, development finance institutions, and private sector banks to support trade in emerging markets and address the shortage of trade finance resulting from the global financial crisis. The program has received commitments of $1 billion from IFC, and from other governments including the U.K., Canada, and the Netherlands. Standard Chartered Bank and South Africa's Standard Bank were the first banks to participate in the program.

Citigroup has the distinction of being the first U.S. Bank to participate in IFC's Global Trade Liquidity Program. Citigroup, the nation's third-largest bank, added that the funding is expected to support estimated trade flows of up to $7.5 billion through the origination of $1.25 billion six times over during the three-year period.

Under the MOU, a total funding facility of $1.25 billion would be formed. Citigroup would provide 60% or $750 million of the funding, and IFC and other development agencies will purchase participation for the other 40%, or $500 million in the aggregate, for trade assets averaging a tenor of 180 days. Under GTLP, the "risk sharing" on the part of the private banks and the IFC is one of the major innovations of the program.

Under the funding facility, Citigroup will use the funding to originate trade finance transactions from emerging market banks in Asia, Latin America, Central and Eastern Europe, the Middle East and Africa, allowing these banks to extend financing to local importers and exporters. Citigroup targets to gain leverage over competitors by tapping opportunities arising from lack of credit in emerging markets. This in turn will help stimulate country and regional commerce.

Francesco Vanni d'Archirafi, chief executive officer of Citi's Global Transaction Services business added, "Citi has been a trusted partner to banks, corporations and the public sector across the emerging markets for many decades, and through our collaboration with IFC as well as our other development and export credit agency partners around the globe, we are firmly committed to restoring the flow of trade and commerce financing around the world."

World trade, which grew at double-digit rates in most major economies for much of 2008, began to decline sharply in all regions starting around September 2008. World trade dropped by 12% in the last three months of 2008, according to the World Trade Organization or WTO, which forecasts a 9% decline in trade for 2009, the largest annual contraction since World War II. The trade finance shortage for developing countries is in the range of $100 billion to $300 billion, according to WTO.

The communiqué issued after the April 2009 G20 Summit in London calls on members to "assure availability of at least $250 billion over the next two years to support trade finance" through the member countries' export credit and investment agencies and the multilateral development banks. Contributions to this end so far are received from the IFC, $1 billion; China, $1.5 billion; Britain, about $447 million; Canada, $200 million; and the Netherlands, $50 million.

In Monday's regular trading session, C is currently trading at $3.42, down $0.05 or 1.30% on a volume of 24.05 million shares. In the past 52-week period, the stock has been trading in a broad range of $0.97 to $23.50.

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