ADVERTISEMENT

Citigroup to sell $3 bln in stock; shares fall

In Hungary

Citigroup Inc said it plans to sell $3 billion of common stock to bolster its capital levels, sending its shares down in after-hours trading.

The largest US bank is raising capital after suffering a $15 billion net loss over the last two quarters, and reporting more than $45 billion of write-downs and credit losses since June 30.

Chief Financial Officer Gary Crittenden said in a statement that Citigroup had received “strong” interest in the public offering. The company said the issue may grow in size.

Since late 2007, Citigroup has raised more than $36 billion of capital, including last week's sale of $6 billion of preferred stock. The bank is also selling assets, such as a $12 billion leveraged loan portfolio it sold this month to private equity investors.

Analysts said selling shares makes sense after Citigroup stock rose 46% from the low of $18.00 on March 17, a level not seen since October 1998, on optimism that the worst of the write-downs may have passed. The offering is the first in Citigroup's recent capital-raising to involve common stock.

“Obviously it's dilutive, but it's smarter than going out and having to pay a high premium for a preferred issuance.” said William Smith, chief executive of Smith Asset Management in New York, which owns Citigroup shares.

Citigroup plans to sell the stock on Wednesday, people briefed on the matter said.

The US Federal Reserve is also widely expected to cut interest rates that day. If the central bank suggests that stability is returning to the financial system, bank stocks may rally, which could help Citigroup get a better price for its shares.

Citigroup is one of many large banks and brokerages worldwide to raise capital and shed assets after ramping up for years on subprime mortgages and other debt that has gone sour.

“What's amazing is, as horrible as this sector is, however much everybody beats it down all the time, there seems to be an endless stream of people who are more than willing to throw money at these guys,” Smith added.

Shares of Citigroup, a Dow Jones industrial average .DJI component, fell 80 cents, or 3%, to $25.52 in after-hours electronic trading. They had fallen 49 cents during regular trading.

Citigroup's market value is about $138 billion, based on the closing price and reported shares outstanding as of March 31.

Among other US banks to raise capital this month have been Bank of America Corp, Wachovia Corp, Washington Mutual Inc and National City Corp.

Citigroup said its common stock offering, combined with recent preferred share offerings, will leave its Tier-1 capital ratio as of March 31 at 8.5% on a pro forma basis.

The bank on April 18 reported a 7.7% Tier-1 ratio. The ratio measures a bank's ability to cover losses. Regulators say 6% implies a “well-capitalized” bank.

Citigroup's own investment bankers are arranging the latest stock offering. (Reuters)

ADVERTISEMENT

IMF raises Hungary 2021 GDP growth forecast to 7.6% Analysis

IMF raises Hungary 2021 GDP growth forecast to 7.6%

Parliament approves amendment to Competition Act Parliament

Parliament approves amendment to Competition Act

New CEO announced at Codic Hungary Appointments

New CEO announced at Codic Hungary

Budapest bike-sharing scheme boasts record ridership City

Budapest bike-sharing scheme boasts record ridership

SUPPORT THE BUDAPEST BUSINESS JOURNAL

Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.