Citigroup, the recipient of the largest bank bailout in American history, has struck a deal with federal regulators to repay $20 billion to taxpayers to free itself from pay restrictions imposed by the Treasury Department.
Citi, the only bank that is classified as receiving “exceptional financial assistance” by the government, says that it will raise funds with a sale of $20.5 billion of equity and debt. The company also said in a statement today that it will issue substantial amounts of common stock in lieu of cash compensation.
Vikram Pandit, Citigroup’s CEO, has pressed hard with federal regulators for an exit of the Troubled Asset Relief Program, out of concern that pay restrictions imposed by Treasury Paymaster Kenneth Feinberg, saying that those pay constraints made Citigroup vulnerable to employee poaching by its rivals on Wall Street.
Citigroup will also provide employees with $1.7 billion worth of common stock in lieu of cash that they would have otherwise received as compensation.
The finalized TARP payments will result in about a $5.1 billion loss. Citigroup will also end its loss-sharing agreement with the government on $300 billion worth of its riskiest assets. The company said that cancelling about $1.8 billion of trust preferred securities related to the program will result in a $1.3 billion lost, the company said.
Citigroup’s shares fell to $3.75, down from its close of $3.95 on December 11th. Citigroup’s stock tumbled 41% this year, leaving the lender with a value of about $90 billion.
“We planned to exit TARP only when we were convinced that it was prudent to do so,” Pandit said in the statement. “By any measure of financial strength, Citi is among the strongest banks in the industry.”
