US EXITS FROM CITIGROUP WITH $10.5BN STAKE SALE
The United States Treasury Department has sold its remaining stock in Citigroup Incorporation for $10.5bn, bringing the country's third-biggest bank a step closer to independence from the government, after a $45bn bail-out in 2008, Bloomberg reported on Tuesday.
The Treasury said it disposed of 2.4bn shares at $4.35 each, compared with Monday's closing price of $4.45 on the New York Stock Exchange. The sale raises the profit for taxpayers on the rescue to about $12bn, including the share gain, dividends and proceeds from other securities.
The sale helps Citigroup exit the 2008 bail-out, which was provided to keep the New York-based bank from collapsing as its stock sank below $5 and some depositors started withdrawing their money. Citigroup also had to get $301bn of government guarantees on its riskiest assets, making the bailout the biggest among US banks.
'We're seeing a form of governmental handcuffs being released,' Bill Bradway, founder of banking consultant Bradway Research LLC in Framingham , Massachusetts , said before the announcement. 'Citi will be basically disentangling itself from direct ownership from the government, and the government is cashing out.'
Citigroup shares advanced 5 cents to $4.50 in early trading at 7:49 a.m. in New York . They rallied 34 percent this year through yesterday, though remain down about 92 percent from their December 2006 high of $56.41. Bank of America Corp., the biggest U.S. bank by assets, has declined 23 per cent this year while JPMorgan Chase & Company, the second-biggest, fell about 4 per cent.
'We had an opportunity to lock in substantial profits for the taxpayer and avoid future risk,' Tim Massad, acting assistant secretary for financial stability, said in the government statement.
The Treasury said its average price for selling 7.7bn Citigroup shares was $4.14. The government acquired the shares at a conversion price of $3.25. The share increase produced a gain of about $6.85bn.
The US has been winding down bank-bailout and emergency- lending programs while trying to recoup the money it provided to bolster private companies including General Motors Company and American International Group Incorporated.
The Treasury received $13.6bn from last month's initial public stock offering by Detroit-based General Motors, and still holds about 33 percent of the automaker. The government said in September it plans to convert $49.1bn of AIG preferred shares into common stock that would eventually be sold in the open market.
The government stake in Citigroup came from converting $25bn of bailout money last year into common stock at $3.25 a share. The 7.7 billion shares equated to a 27 per cent stake.
'Citi is pleased that the US Department of the Treasury has finalized plans to exit from its remaining holdings of Citigroup common stock,' Jon Diat, a spokesman for the New York-based bank, said in an e-mailed statement. 'We are very appreciative of the support provided by the UST during the financial crisis.'
The Treasury still owns warrants on 465.1m Citigroup shares, and the Federal Deposit Insurance Corp. holds $800m of the bank's trust-preferred securities on behalf of the Treasury, according to a regulatory filing.