The US treasury department will start selling its 7.7 billion Citigroup Inc shares as soon as today, in the biggest step since December to wean the bailed-out bank off government support.
The department said today that its first sales of Citigroup stock will cover up to 1.5 billion shares. That would amount to about 20 per cent of the 7.7 billion shares of Citigroup common stock that the government owns. It received the shares as compensation for the massive support it extended to the bank during the height of the financial crisis.
The US government owns 27 per cent of the bank's shares, acquired when it gave Citi $45 billion in bailout money in 2008 and 2009. Citi has paid back $20 billion in preferred shares, but another $25 billion was converted to common stock last year.
In a statement yesterday, Treasury said that it planned to proceed with the sales of the Citigroup common stock "in an orderly fashion under a pre-arranged trading plan with Morgan Stanley, Treasury's sales agent". It did not disclose in its brief announcement exactly when the initial stock sales would begin or how long the sales would last.
The department said Morgan Stanley had the authority to make the initial sales "under certain parameters" and that it expected to give the company the authority to sell additional shares after the initial 1.5 billion shares had been sold.
The sales should earn a tidy profit for the government, which purchased the common stock in the summer of 2009 at a share price of $3.25 a share. Citigroup closed Friday at $4.86 a share but was changing hands in pre-opening trading on Monday at $4.82 per share.
Treasury had announced last month that it would soon begin sales of its Citigroup stock and planned to sell the shares over the course of this year.
Citi, one of the hardest-hit banks during the financial crisis, also received one of the largest rescue packages under the goverment's $700 billion bailout fund, known as the Troubled Assets Relief Program.
The Treasury announcement disappointed investors who were hoping that the government had already started unloading its Citigroup stake, analysts said.