The US Treasury priced an offering of its remaining shares in Citigroup, making an exit from its $45bn bail-out of the bank at a profit and freeing the company from the stigma of government ownership.
On Monday night the Treasury announced that it had found buyers for 2.4bn shares at $4.35 a share, reaping $10.5bn at a narrow 1.25 per cent discount to Monday’s market closing price.
Eighteen months after Goldman Sachs and JPMorgan Chase were deemed healthy enough to repay the billions of dollars doled out from the government’s troubled asset relief programme at the height of the financial crisis in 2008, Citi – which took the biggest investment of any bank – will finally follow suit.
“By selling all the remaining Citigroup shares today, we had an opportunity to lock in substantial profits for the taxpayer and avoid future risk,” said Tim Massad, a senior Treasury official. “With this transaction, we have advanced our goals of recovering Tarp funds, protecting the taxpayer, and getting the government out of the business of owning stakes in private companies.”
The biggest private stakes left on the Treasury’s ledger are in General Motors, the US carmaker, and AIG, the insurance group. The government also has to map the future shape of Fannie Mae and Freddie Mac, the quasi-nationalised mortgage guarantors.
Morgan Stanley managed the sale of the Treasury’s remaining 7 per cent of Citi, which comes after 12 months of incremental sales of an initial 34 per cent stake. The government had looked likely to miss a target to exit from the company this year.
It marks a milestone in the winding-up of the emergency government support that saved the US financial system at the cost of widespread public anger.
The Treasury had already announced $42.8bn in proceeds from the sale of 4.4bn shares to the end of October, including dividends, the repayment of preferred shares and interest.
Since then the Treasury has sold an additional 900m shares at about $4 a share, enough to profit from the investment. The government will continue to hold warrants, which can be converted into stock or sold, and is claiming a profit of at least $12bn.
Citi, which has been encouraging the government to exit its stake for more than a year, said it was “pleased” by the announcement and “very appreciative of the support provided . . . during the financial crisis”.
The authorities’ exit will enable the bank to shake off the stigma attached to having the US government as its largest shareholder. Since the crisis-era bail-out, Citi’s management, led by Vikram Pandit, chief executive, maintained that Washington had little or no influence on the company’s strategy and business model.
However, the US government’s presence on the bank’s shareholder register made it easier for rivals to dismiss the bank as a ward of the state and raise questions over its independence and business strategies especially on controversial issues such as compensation.
Shares in the group were flat before the announcement.
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