Citigroup’s level of frustration with the Treasury Department’s refusal to sell its 34% stake in the company continues to grow.
A day after Bank of America (BAC) announced plans to pay back the TARP-funded capital infusion it received during the height of the credit crisis last year, Citi (C) is also making news.
According to Bloomberg, executives at the New York-based firm — apparently eager to get rid of government control of the firm’s business — are growing increasingly frustrated with the Treasury because they can’t sell stock to raise money for a $20 billion TARP repayment until the Treasury signals when and how it will unload its 7.7 billion shares it currently holds. For almost three months now executives at the bank have tried to persuade Treasury to move ahead with a sale, people familiar with the situation told Bloomberg.
“The ball is in the government’s court,” said Chris Kotowski, an analyst at Oppenheimer & Co. in New York, who has a “market perform” rating on the bank’s shares. “It’s not Citibank’s decision to sell them or not sell them.”
Getting out from under the government’s thumb is clearly proving quite difficult for the banking giant.
Citigroup received a total of $45 billion last year from the Treasury’s $700 billion TARP in federal aid and guarantees to protect against losses on more than $300 billion in risky assets. In September, $25 billion of that was converted into common stock, allowing the government to take a 34% ownership stake in the banking giant, which the Treasury is free to sell at any time. But don’t expect it to happen anytime soon.
Reason being ; many banks, including Citi and Wells Fargo (WFC), still face significant losses on loans as people fall behind on payments — losses that could further deteriorate their capital and put them in danger of insolvency (Citi reported $8 billion in loan losses in Q3 compared with $5.1 billion for Wells).
A Treasury spokeswoman, declined to comment on whether the government has sold any shares of Citi or when it plans to dispose of the stake. Worth pointing out here is the fact the Treasury is sitting on a gain of about $6 billion from the shares it holds based on the bank’s current pps.“Treasury does not comment on individual institutions as a general policy,” the spokeswoman said.
Citigroup spokesman Jon Diat said he couldn’t comment.