Citigroup Said to Near Accord on TARP Repayment, US Stake Sale
By Bradley Keoun
(Bloomberg) — Citigroup Inc. (C) is nearing an accord with the Treasury Department and regulators that would let the bank repay its $20 billion of bailout funds and escape government pay limits, people familiar with the matter said.
Under the plan, which may be announced as soon as today, the U.S. bank would raise about $20 billion of capital, said three people briefed on the plan, who declined to be identified because the talks are private. A partial offering of the Treasury's 7.7 billion shares may be coordinated with New York-based Citigroup's effort to raise capital, the people said.
Chief Executive Officer Vikram Pandit is pressing for an exit from the Troubled Asset Relief Program to avoid being the only large bank left on "exceptional assistance," a Treasury designation reserved for companies including American International Group Inc. (AIG) and General Motors Co. that are surviving on taxpayer aid. Bank of America Corp. (BAC) exited last week after paying back $45 billion of bailout funds.
Citigroup also plans an early termination of guarantees from the Treasury, Federal Deposit Insurance Corp. and the Federal Reserve on $301 billion of the bank's riskiest securities, mortgages, auto loans, commercial real estate and other assets, the people said. Citigroup paid $7 billion in advance for the guarantees, which last five to 10 years, depending on the type of underlying assets. The matter remains under discussion, the people said, adding that the terms or timing could still change.
In October, Pandit said he was "focused on repaying TARP as soon as possible" in cooperation with regulators. Pandit pushed to accelerate the talks after Bank of America's plan was announced, people familiar with the matter said last week.
Pandit wants to repay the exceptional assistance partly out of concern that 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 spokesman Jon Diat declined to comment. A Treasury spokesman, Andrew Williams, declined to comment. Williams said last week, "We continue to believe that banks and our financial system are better off with private capital instead of government capital."
Citigroup, which took $45 billion of TARP funds last year, converted about $25 billion in September into common stock, equivalent to a 34 percent stake. Some details of Citigroup's plan were reported earlier by The Wall Street Journal.
The government is trying to wind down bailout programs extended as financial markets convulsed late last year. Treasury Secretary Timothy Geithner said in a Dec. 4 interview that most taxpayer money injected into banks through TARP will eventually be recovered.
JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS), all based in New York, repaid bailout funds in June. San Francisco-based Wells Fargo (WFC) & Co., with $25 billion of TARP money, isn't subject to pay limits because it never needed a second helping of bailout funds.