'Samba and Citigroup have agreed that as of 31 October, 2003 they will complete the transition to local management as contemplated in the original management agreement. Citigroup's shareholding in Samba is not impacted by this transition. Citigroup remain fully committed to its clients in the kingdom and in the region,' Citigroup said in a statement.

Citigroup currently holds a 20 per cent stake in Saudi Arabia's second largest bank. This follows last November's sale of a 2.83 per cent stake in the bank's equity in a move that surprised the local market. 'There was a feeling then that this was Citigroup dipping its toe in the water with a preliminary sale, and that something else was coming,' says a banker in Riyadh. 'I would not be surprised if there is a further sell down to come. Why would Citigroup want to hold a minority position in a bank it doesn't manage in a far from benign tax environment?'

Even under the previous arrangement, Samba was an oddity within the Citigroup business model: it was the only institution in more than 100 markets in which Citigroup operates, in which it held a management contract without holding a controlling stake.

The end of the technical management contract will be accompanied by a change of senior personnel within Samba. Mike de Graffenried has been replaced as managing director by Eisa al-Eisa, who previously served as Samba's deputy managing director and already had a seat on the board. The other Citibankers within Samba, who account for less than 1 per cent of the bank's 2,300 headcount, will also be replaced.

Both Samba and Citigroup officials have declined to comment on how the agreement might impact on the banks' respective regional strategies. 'From one perspective, it clears the playing field,' says the banker in Riyadh. 'The passing of the CML [Capital Market Law] will allow Citigroup to re-enter potentially attractive parts of the local financial services markets under its own name. Equally, any further loosening of the ties between Citigroup and Samba could pave the way for Samba adopting a strategy for regional expansion. This is something that has been looked at in the past but was rendered too complicated by the ties to Citigroup.'

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