US Treasury nets $2bn as it offloads shares in Citi to cut its stake to 18pc
THE US Treasury said yesterday it has earned a gross profit of about $2bn (£1.3bn) on sales of about one-third of its common stock holdings in Citigroup as the government ramps up efforts to unwind bailout programmes.
The sales have cut the Treasury’s stake in the bank from nearly 27 per cent to about 17.6 per cent. Citi shares rose briefly in morning trading, before falling about 1.33 per cent to $3.71.
Citigroup investors predicted the company’s stock may rally briefly over the next two weeks, as the government pauses in its sales efforts. But the general overhang on Citigroup stock will remain until the Treasury sells the rest of its stake, they said.
Pressure on Citi shares will ease when “you get rid of the government ownership, which is huge,” said Bill Smith, chief executive at Smith Asset Management.
The government is unwinding stakes it acquired in Citi, General Motors, American International Group and Chrysler Group after hundreds of billions of dollars in bailouts in 2008 and 2009.
The Treasury, which owns 60.8 per cent of GM stock as a result of its $50bn bailout last year, hopes to sell about 20 per cent of its holdings as part of the automaker’s initial public offering.
That figure could change, according to sources with knowledge of the preparations.
The Treasury said yesterday it took in gross proceeds of about $10.5bn from the sale of 2.6bn Citigroup shares under a written trading plan.
The Treasury said that after selling its second tranche of common stock acquired after bailing out the banking giant, it still holds about 5.1bn shares.