Word: deale
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Dates: during 2000-2009
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...Monday, Citigroup said it had worked out a deal to repay $20 billion in government bailout money and terminate a loss-sharing agreement the bank had with the government for Citi's riskiest assets. Citi CEO Vickram Pandit said the moves were signs that his company was returning to financial health. The deal would also remove much of the government's pay restrictions on the bank. "These actions move us closer to ending a very difficult period for our company," wrote Pandit in an internal memo to Citi employees. (See 25 people to blame for the financial crisis...
...bank weaker, not stronger. The move will reduce Citi's capital ratios and hurt earnings; it may also accelerate a retreat of foreign investors from the company's shares. Worse, the government is demanding stricter terms from Citi than it did from Bank of America on the repayment deal it struck just a week ago. The different treatment shows that the government remains more concerned about Citi's finances than those of its rivals...
...Citi's deal to pay back the government was reportedly hashed out over a week's worth of marathon negotiations following Bank of America's repayment last week of $45 billion in government assistance. Citi did not want to be one of the few remaining big banks still using the government's crutch.(See the worst business deals...
...Nonetheless, the deal will be costly for Citi. In order to exit TARP, the bank will have to sell $20.5 billion in new shares. Analysts estimate the stock sale will lower the company's earnings per share by about 20%. "One of the basic problems for [Citigroup's] valuation is that it has too many shares as a result of its many rounds of capital raising and exchange offers," says analyst David Hensler, who follows Citi for research firm Creditsights...
...Finally, the deal Citi struck with the government may indicate to investors that the bank is actually in worse shape than many thought. To exit TARP, Bank of America was required to raise $18.5 billion in new capital, or about 40% of the $45 billion in capital it repaid the government. Other banks have had to raise as much as half of the amount they want to pay back the government in new capital. Citigroup, though, is required to raise more than 100% of what it wants to pay back - $20.5 billion in new capital, half a billion dollars more...