Citigroup, the last of the major banks still stuck in TARP is looking is looking for an exit strategy. Supposedly a deal is near. Bloomberg is reporting Citigroup Said to Near Agreement on TARP Repayment.

Citigroup Inc. is nearing an accord with the Treasury Department and regulators that would let the bank repay its $20 billion of bailout funds and escape government pay limits, people familiar with the matter said.

Under the plan, which may be announced as soon as today, the U.S. bank would raise about $20 billion of capital, said three people briefed on the plan, who declined to be identified because the talks are private. A partial offering of the Treasury’s 7.7 billion shares may be coordinated with New York- based Citigroup’s effort to raise capital, the people said.

Citigroup also plans an early termination of guarantees from the Treasury, Federal Deposit Insurance Corp. and the Federal Reserve on $301 billion of the bank’s riskiest securities, mortgages, auto loans, commercial real estate and other assets, the people said.

JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley, all based in New York, repaid bailout funds in June. San Francisco-based Wells Fargo & Co., with $25 billion of TARP money, isn’t subject to pay limits because it never needed a second helping of bailout funds.

The sooner Citigroup discards its $300 billion in loan guarantees, the easier taxpayers can breathe. The question is, what can Citigroup sell to raise $20 billion? Whatever it is, shareholder dilution will come into play, either directly by a stock offering or indirectly by Citi selling off another asset.

In 2007 I said Citigroup would never survive in one piece.
It didn’t.

  • Citi sold Diner’s Club International to Discover in April 2008
  • Citi sold Salomon Smith Barney brokerage to Morgan Stanley in September 2009
  • Citi sold Phibro commodities-trading unit to Occidental Petroleum in October 2009
  • Citi sold its Nikko Asset Management to Sumitomo Trust in October 2009
  • Citi sold Diner’s Club North America to BMO in November 2009
  • Citi sold Bellsystem24, a Japanese call center operation to Bain Capital in November 2009

On November 5 Citigroup files for IPO of Primerica unit, its life insurance division.

To raise $20 billion inquiring minds are asking what’s next?

Candidate List

Retail Branches

I said long ago that Citigroup would eventually need to get rid of its credit card operations. The only problem is I can’t figure out who is big enough to swallow that. Certainly no bank is sound enough.

Whatever it sells, Citigroup will have gone full circle.
Citibank to Citigroup to Citibank.
The Citi Never Sleeps

Citi’s share price has gone full circle as well, from under $5 in 1993 to $51 in 2007 to under $5 in 2009. Citi Executives made countless millions in stock options and salary, running up leverage and ultimately running the company into the ground.

By the way, it was a comment of former Citigroup CEO Chuck Prince on July 10, 2007 that led me to make a market top call: Quotes of the Day / Top Call

Selected Snips:

Chuck Prince – Citigroup CEO: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing”.

Mish: If ever there was market arrogance, the statements by Chuck Prince says it all. It’s tough calling a top but I am going to try. I suggest the current trend is exhausted. My last “top call” was specially in regards to housing in the summer of 2005. Can lightning strike twice?

Citigroup hit its yearly high in May of 2007, the S&P; 500 peaked in October a few percent above the July high.

Mike “Mish” Shedlock
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