AMERICAN taxpayers stand to nearly double their profit from the bailed-out Wall Street banks after the US Treasury said it would sell its entire stake in Citigroup yesterday.

The US government will reap up to $8.8bn (£5.9bn) if it manages to offload the shares at yesterday’s opening price of $4.39, a four-month high. The profit would bring the total excess earned by the government from the banks in the form of dividends and fees on their aid packages to around $20bn.

A spokesman for the US Treasury said it would “sell its Citigroup common shares into the market through various means in an orderly and measured fashion”. Analysts said the announcement was proof that Citi’s darkest days were drawing to a close.

It is understood the stock will be drip-fed into the market at a rate of up to 10 per cent of average traded volume every day to avoid excessive pressure on Citi’s share price. The government’s adviser, Morgan Stanley, is expected to draft a fixed programme whereby the Treasury has no influence over timing.

But in a reminder of the difficulties of getting rid of 7.7bn shares, Citi’s price lurched downwards yesterday to wipe $250m from the taxpayer’s projected profit. The government is likely to have downside protection which would halt the sale process should Citi’s stock price fall below a certain level.

Citi was the worst hit by the financial crisis along with Bank of America, needing $45bn of state help in two injections. Around $25bn was converted into shares at $3.25 each, while the remainder came as a loan which was repaid in December.

Richard Staite, analyst at Atlantic Equities, said: “This is a good thing for the company and taxpayers. The sale has been hanging over the share price for quite a while now and investors have been waiting for this.”

The way in which Washington exits its stake – and generates a profit – will be watched closely by the UK government, which is yet to sell out of Lloyds Banking Group and Royal Bank of Scotland.

After Bank of America and Wells Fargo repaid their state investments in December, Citi becomes one of the last Wall Street titans to shake off the shackles of government ownership.