Citi to repay $20 bn, regain its 'freedom'

NEW YORK: Citigroup reached an accord with the Treasury Department and regulators to repay $20 billion of the bailout it received from US taxpayers . The lender will sell $20.5 billion of capital and debt, the New Yorkbased bank said in a statement on Monday. The bank will sell $17 billion of common stock, with an overallotment option of $2.55 billion, and $3.5 billion of tangible equity units. The US Treasury will concurrently sell as much as $5 billion of common stock it holds. The bank said it will also substitute “substantial common stock” for cash compensation.

Chief executive officer Vikram Pandit has pressed for an exit from the Troubled Asset Relief Programme to avoid being the only large bank left on “exceptional assistance,” a Treasury designation reserved for companies including American International Group and General Motors that are surviving on taxpayer aid. Bank of America exited last week after paying back $45 billion of bailout funds.

“We planned to exit TARP only when we were convinced that it was prudent to do so,’’ Mr Pandit said in a statement. “By any measure of financial strength, Citi is among the strongest banks in the industry.”

Citigroup fell to $3.88 in European trading early on Monday, down 1.8% from its $3.95 close in New York on December 11. The stock has tumbled 41% this year, valuing the lender at about $90 billion.

In October, Mr Pandit said he was “focused on repaying TARP as soon as possible” in cooperation with regulators . Mr Pandit pushed to accelerate the talks after Bank of America’s plan was announced, people familiar with the matter said last week.

Mr Pandit, 52, had indicated he’s seeking to repay the exceptional assistance partly on concern the government imposed pay limits might make Citigroup vulnerable to employee poaching by unfettered Wall Street rivals, according to people familiar with the matter.

Citigroup, which took $45 billion of TARP funds last year, converted about $25 billion in September into common stock, equivalent to a 34% stake in the bank.

The government is winding down the bailout programmes it arranged as financial markets convulsed late last year. Treasury Secretary Timothy Geithner said in a December 4 interview that most taxpayer money injected into banks through TARP will eventually be recovered.

JPMorgan Chase, Goldman Sachs Group and Morgan Stanley, all based in New York, repaid bailout funds in June. San Francisco-based Wells Fargo, with $25 billion of TARP money, isn’t subject to pay limits because it never needed a second helping of bailout funds.