Citi could sell $20 billion of shares soon to repay TARP – CNBC

By Reuters Staff
December 9, 2009

NEW YORK, Dec 9 (Reuters) – Citigroup Inc plans to pay back TARP by raising money in an equity offering that could be announced as early as Thursday and could be some $20 billion, television network CNBC reported, citing sources.

Earlier on Wednesday, the bank’s chairman, Dick Parsons, told CNBC that Citigroup was in talks with regulators about repaying the funds it received from the U.S. Treasury’s Troubled Asset Relief Program.

“We believe Citigroup is in a position to repay the TARP money, but there is an active discussion we have to have with regulators …” said Parsons, who was at New York Governor David Paterson’s speech on the economy on Wednesday at the Museum of American Finance.

Citi spokesman Jon Diat declined to comment.

The bank is eager to pay back the government in part to avoid pay restrictions for 2009 compensation.

Bank of America Corp sold $19.3 billion of shares last week and today announced it had completed repaying its $45 billion of government money borrowed through TARP. In June, major banks including Goldman Sachs Group Inc, JPMorgan Chase & Co and Morgan Stanley paid back their bailouts.

On Monday, Reuters reported that Citigroup and the U.S. government disagreed over how much the bank should raise to repay taxpayers, according to people briefed on the matter. The people said talks could take weeks or months.

Citigroup received $45 billion of bailout money from the Troubled Asset Relief Program last year over the course of two rescues. In a third rescue this year, the government agreed to convert $25 billion of those funds into Citigroup common shares.

Those 7.7 billion of common shares are now worth closer to $30 billion.

People briefed on the matter said on Wednesday that the bank is very eager to pay back its TARP money as soon as possible, and stands ready to do a multibillion-dollar share offering.

But analysts said that doing a deal will be difficult, in part because of the government’s $30 billion stake.

Any deal to raise capital would likely have to also include a plan for the government to shed those shares, and while selling $20 billion shares may be possible, selling $50 billion could be more difficult, they said.

And investors would want to know how the bank was resolving a government insurance policy that originally protected about $300 billion of Citigroup assets against excessive losses, analysts said. Citigroup issued another $7 billion of securities to the United States to pay for that coverage.

Exiting TARP would allow Citigroup to get out from under the thumb of the U.S. government’s pay czar, who has the authority to rule on how the bank pays its employees.

Citi shares closed down 5 cents at $3.86 on the New York Stock Exchange.

(Reporting by Steve Eder and Dan Wilchins; Editing by Leslie Gevirtz, Gerald E. McCormick and Steve Orlofsky)

((Reuters email: steve.eder@reuters.com; +1 646 223 6069))

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