Arabs Bullish on Banks

At a time when credit remains tight in the U.S. banking sector, Arab investors are bringing new capital onto the market.

In a recent development an Arab group has received full regulatory approval to take over Financial General Bankshares (FGB)-a $2.3 billion Washington, D.C. bank holding company and is now offering to purchase, until April 8, all of its outstanding ordinary common stock up to a value of $185 million.

Quick Benefits

Officials at FGB welcomed the takeover, saying the new Arab owners will bring some immediate benefits to the bank. They are bringing in about $12 million in new capital, which along with an experienced new management team will allow them to provide centralized management for FGB's 12 banks (144 offices) in four states (Tennessee, Maryland, Virginia, New York) and Washington, D.C. Up to now, FGB has been a passive holding company allowing each bank a high degree of autonomy. The new centralized system is expected to provide economies of scale, among other advantages. The new man in charge, as chief executive officer, will be Robert Stevens, an Ohio banker who successfully consolidated 41 banks in that state.

Present shareholders of FGB are being offered $33.80 net per share for their par value 10-cents stock-a sum that is 158 percent of the book value per share of FGB at the end of 1981. The purchaser is the FGB Holding Corporation, a Virginia company which is an indirect, wholly owned subsidiary of Credit and Commerce American Holdings (CCAH), a Netherlands Antilles corporation. The owners of CCAHhad already procured 18.6 percent of Financial General Bankshares prior to the present tender offer, which comes after nearly four years of effort to obtain the state and federal regulatory approval necessary for the investors to acquire majority control. The investors are already represented on the Board of Directors by Stuart Symington, Clark M. Clifford, and Elwood R. Quesada.

In New York, two Saudi investors, Suliman S. Olayan and Prince Khaled bin Abdullah bin Abdulrahman AI-Saud, have raised their stake in the Wall Street securities firm Donaldson, Lufkin and Jenrette (DLJ) to 24.5 percent, by purchasing about $7.4 million of shares on the open market during a recent six-week period. The two investors first bought into DLJ back in 1975, starting with an equity share of 5.7 percent. Their combined shares were worth approximately $31 million at the end of March, 1982.

A spokesman for DLJ welcomed the additional investment by the two Saudis, describing them as "longstanding friends of the firm."

Despite some opposition in Congress, recent statements by top U.S. financial officials, including Federal Reserve Board Chairman Paul Volcker and Assistant Secretary of the Treasury C. Fred Bergston, have supported the acquisition of equity in U.S. banks by foreign investors. Mr. Volcker has said that "no serious problems have surfaced that can be ascribed to the fact of foreign ownership, and added that as a rule "the U.S. bank has benefited from the strength and support of the foreign owners."

According to the U.S. Department of Commerce, Arab investors own less than one percent of the foreign direct investment in the United States.