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Citigroup to repay $20bn bail-out Citigroup to repay $20bn bail-out
(about 2 hours later)
Citigroup says it will repay $20bn of US bail-out funding. The move marks its exit from the US government's Troubled Asset Relief Program (Tarp). Citigroup has said it will repay $20bn of US bail-out funding, marking the bank's exit from the US government's Troubled Asset Relief Program (Tarp).
Citigroup is the last of the big US banks to leave the support mechanism. It will issue $17bn in new shares to help finance the move.Citigroup is the last of the big US banks to leave the support mechanism. It will issue $17bn in new shares to help finance the move.
Theoretically, it means it can now avoid pay restrictions on its top 100 employees.Theoretically, it means it can now avoid pay restrictions on its top 100 employees.
The bank said it owed American taxpayers "a debt of gratitude".The bank said it owed American taxpayers "a debt of gratitude".
Citigroup received $45bn in government support but only has to pay back $20bn as the US government converted the rest into a stake in the company. It owns 34% of the bank.Citigroup received $45bn in government support but only has to pay back $20bn as the US government converted the rest into a stake in the company. It owns 34% of the bank.
The government says it plans to sell these shares within the next year. The government says it plans to sell these shares within the next year. The US Treasury estimates that taxpayers could ultimately see a profit of $13bn-$14bn from the sale.
Payback timePayback time
Nearly 700 banks were assisted by the Tarp, and most were quick to repay the bail-out money because it came with restrictions such as caps on executive pay and dividends. Nearly 700 banks were assisted by Tarp, and most were quick to repay the bail-out money because it came with restrictions such as caps on executive pay and dividends.
Last week Bank of America paid back its $45bn Tarp funding. [Citigroup] are still in the government's embrace. It's just not a bear hug now Anton Schutz, president of Mendon Capital Advisors
Last week Bank of America paid back its $45bn Tarp funding. Now the only national bank remaining with the programme is Wells Fargo.
The US Treasury said it was pleased Citigroup was moving forward with plans to repay the money.The US Treasury said it was pleased Citigroup was moving forward with plans to repay the money.
"While much work lies ahead to improve lending and spur job creation, today's announcement by Citigroup takes us another step in the right direction.""While much work lies ahead to improve lending and spur job creation, today's announcement by Citigroup takes us another step in the right direction."
Fat cat meeting Analysts noted that, like other banks repaying the government, Citigroup is still subject to US regulation and pressure.
"They're still in the government's embrace. It's just not a bear hug now," said Anton Schutz, president of Mendon Capital Advisors.
'Fat cat' meeting
Later on Monday, President Obama will meet top banking executives, including those from Citigroup.Later on Monday, President Obama will meet top banking executives, including those from Citigroup.
He will ask them to support his efforts to tighten regulation on the financial industry and to boost lending to small businesses.He will ask them to support his efforts to tighten regulation on the financial industry and to boost lending to small businesses.
The meeting could well prove tense after the president referred to bankers as "fat cats" in a TV interview on Sunday.The meeting could well prove tense after the president referred to bankers as "fat cats" in a TV interview on Sunday.
In its statement, though, Citigroup struck a conciliatory tone, saying it recognised "our obligation to support the economic recovery through lending and assistance to homeowners and other borrowers in need".In its statement, though, Citigroup struck a conciliatory tone, saying it recognised "our obligation to support the economic recovery through lending and assistance to homeowners and other borrowers in need".