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| Version 1 | Version 2 |
|---|---|
| US increases stake in Citigroup | US increases stake in Citigroup |
| (about 8 hours later) | |
| Citigroup and the US Treasury have reached a deal that sees the government substantially increase its stake in the ailing bank from 8% to 40%. | Citigroup and the US Treasury have reached a deal that sees the government substantially increase its stake in the ailing bank from 8% to 40%. |
| The deal does not require extra taxpayer investment, but is dependent on Citi raising extra private capital. | The deal does not require extra taxpayer investment, but is dependent on Citi raising extra private capital. |
| Citi shares ended down more 39% as investors worried about their stake in the bank being diluted by the move. | |
| As one of the banks hardest hit by the continuing credit crisis, Citi has already gained $45bn in Treasury cash. | As one of the banks hardest hit by the continuing credit crisis, Citi has already gained $45bn in Treasury cash. |
| It also has guarantees protecting it from the bulk of losses on $306bn (£216bn) of risky investments. | It also has guarantees protecting it from the bulk of losses on $306bn (£216bn) of risky investments. |
| The latest agreement involves the government converting some of its preferred stock in Citi to common shares. | The latest agreement involves the government converting some of its preferred stock in Citi to common shares. |
| As part of the deal, the bank will suspend paying dividends and will also install new independent directors on its board. | As part of the deal, the bank will suspend paying dividends and will also install new independent directors on its board. |
| Battered | Battered |
| The bank made an $8.29bn loss in the final three months of 2008, and was forced to split into two new firms. | The bank made an $8.29bn loss in the final three months of 2008, and was forced to split into two new firms. |
| The government will only raise its stake to match that put up by private investors, and it has said it preferred banks to remain in private hands. | The government will only raise its stake to match that put up by private investors, and it has said it preferred banks to remain in private hands. |
| It's not like the government has much of a choice Peter Kenny, Knight Equity Markets | It's not like the government has much of a choice Peter Kenny, Knight Equity Markets |
| The treasury's Capital Assistance Programme allows banks such as Citi to borrow money from the government if they need more capital. | The treasury's Capital Assistance Programme allows banks such as Citi to borrow money from the government if they need more capital. |
| Last week, Citigroup's share price fell below $2 to an 18-year low. | Last week, Citigroup's share price fell below $2 to an 18-year low. |
| In November, the US Treasury announced a $45bn rescue plan for the bank, accompanied by a $306bn guarantee for Citi's most risky loans, as part of its Troubled Asset Relief Program (Tarp). | In November, the US Treasury announced a $45bn rescue plan for the bank, accompanied by a $306bn guarantee for Citi's most risky loans, as part of its Troubled Asset Relief Program (Tarp). |
| At present the government's preferred shares represent a 7.8% holding in the company. | At present the government's preferred shares represent a 7.8% holding in the company. |
| The move means Citi shareholders will see their stakes diluted and the government will have a much larger influence over the bank. | The move means Citi shareholders will see their stakes diluted and the government will have a much larger influence over the bank. |
| Citigroup, which two years ago was worth $273bn and is now worth about £20bn, was brought to its knees by five quarterly losses in a row. | Citigroup, which two years ago was worth $273bn and is now worth about £20bn, was brought to its knees by five quarterly losses in a row. |
| It has been battered by the meltdown in sub-prime mortgages - made to people on low incomes or with poor credit ratings. | It has been battered by the meltdown in sub-prime mortgages - made to people on low incomes or with poor credit ratings. |
| A cost-cutting exercise last year resulted in some 52,000 jobs being slashed, bringing the Citi workforce down to about 323,000 people. | A cost-cutting exercise last year resulted in some 52,000 jobs being slashed, bringing the Citi workforce down to about 323,000 people. |
| Avoiding sell-off | Avoiding sell-off |
| Analyst Peter Kenny, managing director at Knight Equity Markets in New Jersey said he did not think shares would be too badly hit by the announcement. | Analyst Peter Kenny, managing director at Knight Equity Markets in New Jersey said he did not think shares would be too badly hit by the announcement. |
| "We are talking about a form of nationalisation, and to the extent that the market is going to accept it," he said. | "We are talking about a form of nationalisation, and to the extent that the market is going to accept it," he said. |
| "The problem is that there is so much going on in terms of trying to manage the continuing and unfolding drama around the credit crisis. | "The problem is that there is so much going on in terms of trying to manage the continuing and unfolding drama around the credit crisis. |
| The bottom line is that it's not like the government has much of a choice. Citi wasn't negotiating. The government was saying, 'This is what you have to do.' | The bottom line is that it's not like the government has much of a choice. Citi wasn't negotiating. The government was saying, 'This is what you have to do.' |
| "The government didn't want to have to take any more than it had to. This is the least they can do, and the most they can do without causing a wholesale sell-off." | "The government didn't want to have to take any more than it had to. This is the least they can do, and the most they can do without causing a wholesale sell-off." |