New York: The US Treasury Department is talking to Citigroup Inc about how to sell the roughly one-third stake the government acquired as part of its bailout of the bank, a news agency reported, citing people familiar with the matter.
The Treasury may start unloading shares as soon as October, and would aim to sell the holdings over the next six to eight months, the newswire reported, citing one of the people familiar with the matter.
Shannon Bell, a spokeswoman for Citigroup, declined to comment. There was no immediate response from the Treasury Department.
The US government has about 7.7 billion Citi shares, representing 33.6 percent of the company`s outstanding stock.
Citigroup has recorded more than USD 100 billion of write-downs and credit costs since the financial crisis began, as it wrestles with bad loans to consumers and bad securities on its books.
The government gave the bank USD 45 billion of rescue money in two bailouts, and then agreed to convert the preferred shares it bought from the bank into common stock.
But since that conversion, the bank`s shares have rallied some 40 percent, and the government could be sitting on billions of dollars of profits.
The difficulty will be in selling a large block of shares without causing the bank`s share price to crater, cutting into the government`s profit.
But Switzerland found extensive demand for its 9 percent stake in UBS last month when it sold USD 5.1 billion of the bank`s shares.
Orders for the shares far exceeded stock on offer, the finance ministry said. UBS`s shares have risen more than 12 percent since that sale, which investors saw as a sign of the bank`s strength.
The US Treasury hasn`t developed a formal plan for the sale of Citi shares, and is considering options such as selling the stock in blocks to investors over six to eight months, or selling a small amount daily or weekly, Bloomberg said, citing people who declined to be identified.
The shares could also be sold at once in a managed offering, the news agency Bloomberg reported.
Citi`s shares traded at USD 4.39 on Monday in after hours trading, down 2.9 percent from their close.