Tokyo, Dec 11: Citigroup Inc is talking with the U.S. government about paying back its bailout money, but it is not clear whether a deal is imminent, a person familiar with the matter said on Thursday.
The bank is hopeful, though, and is planning a $15 billion common stock offering as soon as Thursday, people briefed on the matter said.
The U.S. Treasury is more open to Citigroup’s plans than the Federal Deposit Insurance Corp, one of the sources said.
Citigroup is eager to repay the government so it can avoid the executive pay restrictions that come along with the three rounds of U.S. assistance it received. The Obama administration’s pay czar will soon announce a new wave of pay restrictions for companies that have received extraordinary help from the U.S.
Pay restrictions make it more difficult for Citigroup to keep its most talented employees and attract new ones, compensation experts said.
“We have a backlog of people that TARP banks want to hire and can’t because of pay restrictions,” said Robert Sedgwick, partner in executive compensation and benefits at law firm Morrison Cohen, referring to the government’s Troubled Asset Relief Program.
“If you have an unconditional offer from one bank and another offer that’s contingent on regulatory approval, most people will take the unconditional offer,” Sedgwick said.
But some investors question whether Citigroup ought to head out on its own after posting more than $120 billion of credit losses since mid-2007. The bank has some of the highest capital levels in its sector. But it is still struggling to generate profit from its main banking operations.
“Have they reached a sustainable point of profitability and can they right the ship? It’s too early to tell,” said Joe Plevelich, a research analyst who looks at bank stocks at Schneider Capital Management in Wayne, Pennsylvania.
The bank is closer to righting itself now than it was six months ago, Plevelich added.
Government officials have said they wish to withdraw their support for banks only when they are confident the company is ready.
“The basic objective is to make sure as we exit … we’re leaving the capital position of the institutions stronger, not weaker,” Treasury Secretary Timothy Geithner said.
Citigroup borrowed $45 billion last year under the Troubled Asset Relief Program.
This year, the government agreed to convert $25 billion of those funds into Citigroup common stock, leaving the United States with a roughly 34 percent stake in the bank.
Citigroup, Treasury, and the Federal Deposit Insurance Corp declined to comment.
–Agencies