Citigroup Inc, the last of the four largest US banks that sought funds to exit a taxpayer bailout, raised $17 billion on sale of stock at prices so low that the US government put off a planned divestment of its stake in the lender.
 
The bank sold 5.4 billion shares at $3.15 apiece, which is lower than the $3.25 the government paid in September for acquisition of its stake. According to the New York-based bank, the Treasury would hold its shares for at least 90 days.

Investors demanded a bigger discount on Citigroup's shares than Bank of America Corp or Wells Fargo & Co. The two lenders had together raised more that which than $31 billion this month to exit the Troubled Asset Relief Programme (TARP). Wells Fargo, which beat Citigroup bid to take over Wachovia Corp last year, completed a $12.25 billion share sale on 15 December while JPMorgan Chase & Co repaid $25 billion in June.

According to market analysts, Citigroup needed to show steps to reinstall is quality.

With the sale, Citigroup's common shares outstanding increased to 28.3 billion. That's up from 22.9 billion as of 30 September.

President Barack Obama called CEOs of major banks to a meeting at the White House on Monday to press them to lend more and support his overhaul of financial regulation. He called on banks that benefited from taxpayer bailouts, to do their bit to help recovery.

Though Obama failed to extract any concrete promises on the issues he raised both Obama and the bankers called the meeting productive.

Citi was the only one of the 12 banks that failed to attend as CEO Vikram Pandit was tied up with the repayment of the first $20 billion of the bailout and chairman Richard Parsons could not attend because of bad weather.

Citi's offering followed a share sale by Bank of America Corp in which the Charlotte NC-based bank raised $19.29 billion, which would go toward paying back $45 billion in government bailout funds.

According to Citigroup, after it pays back the $20 billion it would no longer be deemed a recipient of "exceptional financial assistance" under TARP and would, therefore, not be subject to several of the strict executive compensation rules associated with its bailout.

The repayment would not only boost Citigroup's image it would also save the bank $1.7 billion a year in dividend payments, but the capital raise significantly dilutes the current stake of the shareholders.
 
According to the Washington Post, the lender had received a special tax, which saved it $38 billion and helped it exit the bailout.