Citigroup Inc. (NYSE: C) announced Wednesday that it has repaid the $20 billion it received from the government last year as part of the Troubled Asset Relief Program (TARP). The move frees the bank from employee pay restrictions in 2010 that regulators imposed as part of the financial aid.
The bank repaid the TARP funds by repurchasing $20 billion in preferred securities it issued to the Treasury Department in exchange for the aid. The move to payback TARP bodes well for Citigroup as many of its industry peers had already done so, leaving investors to wonder how strong the bank’s financial position actual was.
Though Citigroup will be free of pay restriction in 2010, reports have surfaced that pay czar Kenneth Feinberg sent a letter to the bank stating that pay would still be subject to some restrictions in 2009.
“The TARP program was designed to provide assistance until banks were in a position to repay it prudently. We are pleased to be able to repay the U.S. government’s trust preferred securities and to terminate the loss-sharing agreement,” said CEO Vikram Pandit in a company press release.
Citigroup raised the money to repay TARP funds through a $17 billion secondary stock offering, along with offering $3.5 billion in tangible equity securities, which mainly consists of prepaid common stock purchase contracts.
Citigroup said its capital ratios are now among some of the strongest in the industry. With Wednesday’s transactions, the bank said its Tier 1 capital would have been $101.7 billion at the end of the third quarter, compared to $22.9 billion at the end of December 31, 2008.
“We owe the American taxpayers a debt of gratitude and recognize our obligation to support the economic recovery through lending and assistance to homeowners and other borrowers in need,” added Pandit.
