On Tuesday, The U.S. Treasury Department announced that it had
priced an offering of
) subordinated notes. Through this, the Treasury will completely
offload its holding in the company. Notably, Citi was one of the
major financial organizations rescued under the government's
Troubled Asset Relief Program (TARP) for $45 billion in 2008.
The Treasury anticipates that the sale of Citi's subordinated
notes will result in proceeds worth $894 million. This will
result in the U.S. taxpayers gaining an overall return of roughly
$13.4 billion on the initial investment.
Earlier in 2009, the government rescued Citi by sharing the
prospective losses of the company on loans worth $301 billion. In
return, both the Treasury and the Federal Deposit Insurance Corp.
(FDIC) received preferred stocks that were afterwards converted
into trust preferred securities. During late 2009, the
loss-sharing deal was terminated by Citi, without the government
incurring any loss.
As part of the cessation, the FDIC agreed to transfer $800
million worth of trust preferred securities to the Treasury. In
Dec 2012, after the maturity of the debt associated with the
FDIC's Temporary Liquidity Guarantee Program, the FDIC
transferred the securities to the Treasury. Therefore, the
Treasury now returned these securities to Citi in exchange of
subordinated notes worth $894 million.
The aforementioned deal is a part of the Treasury's incessant
efforts to offload the TARP's bank investment programs, which
stabilized the economy during a major financial crisis in 2008.
The offloading of stake will also result in gains for
The Treasury's stake-offloading initiative is a positive for
Citi as it entirely removes the government overhang on the stock.
Nevertheless, Citi's core business is progressing well and the
international business is gaining momentum, though the earnings
in the coming quarters is expected to remain pressured following
the stringent as well as uncertain regulatory environment and the
shrinking of its revenue base due to the Citi Holdings business
Citi currently carries a Zacks Rank #3 (Hold). Other major
banks that are performing well include
Fifth Third Bancorp
Regions Financial Corp.
). BankUnited carries a Zacks Rank #1 (Strong Buy) and the other
two hold a Zacks Rank #2 (Buy).
BANKUNITED INC (BKU): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
FIFTH THIRD BK (FITB): Free Stock Analysis
REGIONS FINL CP (RF): Free Stock Analysis
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