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U.S. turns a $12-billion profit on Citigroup bailout

The Treasury's sale of its remaining 2.4 billion shares brings to $57 billion its total proceeds from the banking giant. It had injected $45 billion in the company as the financial system crashed.

December 08, 2010|By Tom Petruno, Los Angeles Times

Taxpayers earned a $12-billion profit on the U.S. Treasury's $45-billion bailout of Citigroup Inc., the government reported as it sold the last of its stock in the banking giant.

The Treasury said late Monday that it sold 2.4 billion Citigroup shares to private investors at $4.35 apiece, raising $10.5 billion.

That brought to $57 billion the government's total proceeds from the bank, including previous sales of Citigroup stock as well as dividend and interest income that the bank paid the government.

"By selling all the remaining Citigroup shares today, we had an opportunity to lock in substantial profits for the taxpayer and avoid all future risk," Tim Massad, acting assistant secretary for financial stability, said in a statement. "With this transaction, we have advanced our goals of recovering TARP funds, protecting the taxpayer and getting the government out of the business of owning stakes in private companies."

Citigroup and Bank of America Corp. were the two biggest bank recipients of government aid under the Troubled Asset Relief Program, or TARP. Each bank got $45 billion.

The government injected an initial $25 billion into Citigroup in late 2008 as the financial system crashed and an additional $20 billion two months later as the bank's condition worsened amid massive losses on mortgages and other loans.

Citigroup repaid $20 billion of the bailout money in December 2009. The Treasury's remaining stake of preferred stock was converted to 7.7 billion Citigroup common shares, which it has been selling since spring. The government's cost basis for the shares was $3.25 each.

As the bank returned to profitability this year, its stock had risen 34% year to date through Monday, when it closed at $4.45 a share. The Treasury said the average selling price for its entire 7.7-billion-share stake came to $4.14 a share.

By contrast, in March 2009 the picture had looked grim. Citigroup's shares fell to $1.02 that month on fears that the Obama administration planned to nationalize the most troubled banks. Those rumors, which proved false, marked the bottom for Citigroup's stock and for the market overall.

The government said its Citigroup share sales have generated total proceeds of $31.8 billion, and that it also had earned $2.9 billion in interest and dividends from the bank. Combined with the $20-billion cash repayment a year ago and a $2.2-billion repayment under a temporary asset-guarantee program, total payments by Citigroup came to $57 billion, according to the Treasury's tally.

The bank said in a statement Monday that it was "very appreciative of the support provided by the U.S. Treasury during the financial crisis."

As previously reported, the projected cost of the total $700-billion financial-system bailout fund of 2008 — initially feared to be a huge drain on taxpayers — continues to drop, with the nonpartisan Congressional Budget Office estimating last week that losses would amount to $25 billion.

Citigroup is the last of the biggest banks to repay the Treasury in full. Rivals including Bank of America, Wells Fargo & Co., JPMorgan Chase & Co. and Goldman Sachs Group Inc. already have returned their TARP money.

On Tuesday, with the government no longer an investor, Citigroup shares jumped 17 cents to $4.62.

tom.petruno@latimes.com

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