The US government may end up holding as much as 40 per cent of Citigroup’s common stock,the Wall Street Journal reported on its website,citing sources familiar with the plans.
But Citigroup executives hope the talks with US federal officials will result in a stake closer to 25 per cent,the Journal reported.
The lender is discussing with US officials a scenario in which a substantial portion of the $45 billion in preferred shares held by the US government,amounting to a 7.8 per cent stake in Citigroup,would convert into common stock,the newspaper said.
US stock futures turned positive and Treasuries fell after the report.
A Citigroup spokesman in Hong Kong declined to comment.
Citigroup officials also hope to persuade private investors that have bought preferred shares — including the Government of Singapore Investment Corp (GIC),Abu Dhabi Investment Authority and Kuwait Investment Authority — to also convert their preferred shares into common stock,the Journal reported.
In a separate report,the Financial Times said Citigroup is pressing the US government to agree on a new capital injection that would increase the authorities’ stake in the bank to about 40 per cent,but stop short of an outright nationalisation.
The FT said Citi insiders expect a decision on the company’s future in the coming weeks,but warned it would have to come earlier if its shares fell again in the next few days.
Citi could also try to raise fresh equity with a public share offering,the FT said. The aim would be to keep the government stake to no more than 40 per cent or at least below 50 per cent,it said,citing people familiar with the plan.
Citi stock has dropped 71 per cent so far in 2009.