Citigroup considers payback

NEW YORK: Citigroup, the banking giant one-third owned by the US Government, has been sounding out shareholders about a US$15 billion ($20.63 billion) fundraising that could help it pay back some of the bailout money it received from taxpayers last year.

CEO Vikram Pandit began talks with the Government after rival Bank of America last week said it was reimbursing the US Treasury and exiting the bailout scheme. That would leave Citigroup as one of only two of the original bailout recipients still in hock to the Government.

Regulators at the Federal Deposit Insurance Corporation, which guarantees US$21 billion of Citigroup's debt and virtually all of its US$900 billion of customer deposits, have cautioned against allowing the bank to exit the bailout scheme early without being sure it has more than enough capital to withstand the recession.

The US Treasury, though, is believed to be keener on allowing Citigroup to make the repayments, but it was not clear whether the two sides are close to agreeing how much new capital the bank must raise.

Citigroup chairman Dick Parsons said he believed the bank was in a position to repay the bailout money.

Citigroup received US$45 billion in two instalments as its losses ballooned last year, but US$25 billion was later converted into a 34 per cent equity stake for the US Government.

In a side deal the American taxpayer has also guaranteed to absorb some losses on a US$301 billion portfolio of Citigroup's mortgage-related investments.

The mooted US$15 billion fundraising compares with Citigroup's current market capitalisation of US$88 billion.

Analysts disagree about the relative soundness of Citigroup's business, which has been battered not just by ill-fated investments in credit derivatives and mortgage-related securities but also by mounting losses on its consumer lending and credit cards.

Banks have been eager to exit the bailout scheme because government money comes with restrictions on what they will be allowed to pay their top executives and traders.

- INDEPENDENT