U.S. looking at selling Citi shares

happylux

NEW YORK (Reuters) - The Treasury Department is talking to Citigroup Inc (NYSE:C - News) about how to sell the roughly one-third stake the government acquired as part of its bailout of the bank, news agency Bloomberg reported, citing people familiar with the matter.

The Treasury may start unloading shares as soon as October, and would aim to sell the holdings over the next six to eight months, the newswire reported, citing one of the people familiar with the matter.

Shannon Bell, a spokeswoman for Citigroup, declined to comment. There was no immediate response from the Treasury Department.

The U.S. government has about 7.7 billion Citi shares, representing 33.6 percent of the company's outstanding stock.

Citigroup has recorded more than $100 billion of write-downs and credit costs since the financial crisis began, as it wrestles with bad loans to consumers and bad securities on its books.

The government gave the bank $45 billion of rescue money in two bailouts, and then agreed to convert the preferred shares it bought from the bank into common stock.

But since that conversion, the bank's shares have rallied some 40 percent, and the government could be sitting on billions of dollars of profits.

The difficulty will be in selling a large block of shares without causing the bank's share price to crater, cutting into the government's profit.

But Switzerland found extensive demand for its 9 percent stake in UBS (VTX:UBSN.VX - News) last month when it sold $5.1 billion of the bank's shares.

Orders for the shares far exceeded stock on offer, the finance ministry said. UBS's shares have risen more than 12 percent since that sale, which investors saw as a sign of the bank's strength.

The U.S. Treasury hasn't developed a formal plan for the sale of Citi shares, and is considering options such as selling the stock in blocks to investors over six to eight months, or selling a small amount daily or weekly, Bloomberg said, citing people who declined to be identified.

The shares could also be sold at once in a managed offering, Bloomberg reported.

Citi's shares traded at $4.39 on Monday in after hours trading, down 2.9 percent from their close.

(Reporting by Dan Wilchins; Editing by Bernard Orr, Gary Hill and Carol Bishopric)

happylux

看来政府参股有定时炸弹的嫌疑。

随机行走

Citi's Cost of Smaller Government
By PETER EAVIS

Investors make big mistakes when they obsess over a single issue.

With Citigroup, that issue is the government's 33.6% stake and how fast the bank might be able to get rid of it.

That subject has returned to the fore amid reports that Citi is considering ways of paring the government stake. While that is a key issue, there are other aspects to the Citi story that could materially affect the direction of the stock.

Sure, it would be nice for shareholders to wake up and find the government gone, removing fears, hitherto unfounded, that the bank will be subject to value-destroying political interference. But the shareholder benefits of quickly eradicating government stakes likely would be outweighed by the financial costs. The concern isn't so much the stock-price impact of the government selling existing common shares, even though such sales could weigh on the share price short term.

The bigger question is whether to pay off the government's $27 billion of trust-preferred securities, which have characteristics of both debt and equity, and cost about $2 billion a year to service. If Citi wanted to pay down, say, $20 billion of these with proceeds from a new common-stock issue, it would be about 20% dilutive to existing shareholders, given that Citi's market value is $97 billion.

Also, investors need to ask why Citi management isn't broadcasting what would be a more positive message: It doesn't need to dilute investors further, and it believes it has the medium-term profitability to pay off the government trust-preferred securities with internally generated capital.

Indeed, one of the things Citi executives need to do is explain more clearly where it expects to make its money and concentrate resources in the future. For instance, in which U.S. consumer businesses does Citi think it will beat larger rivals Wells Fargo, J.P. Morgan Chase or Bank of America? And will it need to reinvest in certain businesses within Citi Holdings, the entity that contains a hodgepodge of assets, some of which carry significant credit risk?

Answering such questions could help give Citi shares another leg up. Their recent resurgence is justified, because the bank appears to have enough tangible common equity, or TCE, to weather losses. Its TCE, after deals and bringing assets onto the balance sheet, is equivalent to about 5.1% of tangible assets, one of the strongest ratios in the sector. Yet Citi's shares trade at a slight discount to TCE per share, whereas Bank of America, which also carries political risk, trades at about 1.5 times.

Starting to reduce the government stake in Citi may close some of that valuation gap. But persuading investors that Citi still has powerful enough franchises to go head to head with Wells or J.P. Morgan in important products would do a lot more for the stock.