Citi Nears Deal to Repay TARP - Analyst Blog

Citigroup Inc. (C) is almost close to finalizing a deal with the U.S. government to start repaying the bailout money it has received from the government for its participation in the Troubled Asset Relief Program (TARP) at the height of the credit crisis last year.

Citigroup is expected to infuse capital of over $10 billion through common stock offering to repay the TARP funds. Citigroup had received $45 billion of TARP funds last year. Later, around $25 billion of that was converted into common stock, representing around 34% of its stake held by taxpayers. Citigroup has remaining $20 billion in TARP funds to repay.

Additionally, the future of the insurance policy that guarantees over $300 billion of Citigroup’s troubled assets provided by the Federal Deposit Insurance Corporation needs to be decided. The payment for that insurance was made by Citigroup through preferred stock offering to the government. The government is also expected to disclose its plan for the sale of its 34% stake.

Last week, Citigroup’s Chairman has revealed that the company is in a position to be able to repay TARP funds, but is waiting for the government’s approval. Bank of America Corp. (BAC) announced last Wednesday that it had completed repaying its $45 billion of TARP funds following its $19.3 billion of equity offering last week. This has increased the repayment pressure on Citigroup and Wells Fargo & Co. (WFC), both of which have also received significant amounts of TARP funds. In June, major banks including Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS) paid back their TARP funds.