The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Citi sells Government stake of 34%

Citi has started earnest conversations with the Treasury to help the Treasury encash its paper profit of $9.77 billion and get out of governance of the bank. Right now, the Treasury is probably making more than Warren Buffet is making on his Goldman Sachs stake because of looses in GE and AIG, but the key issue to be underlined is that Vikram Pandit would be able to claim – both for himself and for the Government – a successful close out of the bailout program.

The 34% stake is thus priced at $35 billion and leaves the Treasury with another $27 billion in trust preferred shares and its prominence in Financial Services governance will remain more because of its taxpayers funds continuing at risk, than because of successful reform it will be able to pursue whether it is CARD, Consumer Financial Protection Agency or Federal Bank of New York’s incessant struggle to contain the AIG time bomb..the least of its troubles being the hostility it faces from the sector as it tries to control private sector pay principles ( Pandit does draw 22 times more than the President) The planned sale will constitute 7.69 billion shares. One option would be to sell most of it to a PE fund as recently allowed by the Federal Reserve.

According to Bloomberg, the stake is likely to be sold off at the same average rate of $3.25 effective for the conversion and over an extended period of 6-8 months.. I would think a managed offering is much more than likely if principles of fairness and equity are observed, but it may be too public an option and Obama’s ratings are for the West wing to consider and factor into the Treasury’s final program.

‘Prominent Role’

The Obama administration has begun efforts to wind down the government’s $700 billion financial rescue program, while pledging to manage the withdrawal carefully. In a report yesterday, the Treasury said it was “committed to ensuring the stability of financial markets” and that “the process of exit will be prudent, not hasty.”

Surprise, Surprise (updtd Sept 22,09)

Singapore’s sovereign wealth fund has pocketed a $1.6bn profit after selling half of the 9 per cent stake in Citigroup it acquired during this year’s US-government led refinancing of the troubled bank.  In an unexpected announcement on Tuesday, the Government of Singapore Investment Corporation said that the sale followed the conversion, on September 11, of its $6.8bn of convertible preferred stock for Citigroup common stock at $3.25 a share.


This entry was posted on September 16, 2009 by in Financial Markets, Obamanomics, TARP, Uncategorized, US and tagged .


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