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Monday, December 14, 2009

Citi To Repay Tarp; BofA Repaid Tarp

Today Citigroup (C charts) announced plans to repay TARP. This comes less than two weeks after Bank of America (BofA - BAC charts) announced it moved forward its equity offering to repay tarp due to high demand.

Dec. 14 Headline: Citi to raise $17 billion to repay U.S.
  • Citigroup laid out a plan to repay the money it owes the U.S. government, including issuing $17 billion of stock immediately, as the bank looks to end the executive pay restrictions that came with the funds.
  • The government plans to start selling the roughly $30 billion of Citigroup shares it owns, and is ending its agreement to guarantee a roughly $250 billion pool of Citigroup assets against outsized losses.
  • The government estimates it could see a profit of $13 billion to $14 billion on its investment in the bank.
  • The bank had previously said it planned to sell securities next Monday, but moved the sale forward because of demand. The size of the deal grew to $19.29 billion of common equivalent securities, from an originally planned $18.8 billion, according to a pricing document sent to investors and obtained by Reuters.
  • The securities sold at $15 each, about 5 percent below where Bank of America shares closed on Thursday. The securities will convert to common stock once equity investors approve an increase in authorized Bank of America shares. The bank's shares fell to $15.58 in aftermarket trading.
According to a document released today by Citi titled "Repaying TARP and other Capital Actions," Citi's Tier 1 capital ratio (a measure of a bank strength) will drop to a tie with #2 BofA while its Tier 1 common ratio will remain the leader at 9.0% compared to 8.4% at #2 BofA.

click for full size images

Today BofA and Citi are trading at $15.53 and $3.74, respectively. Current:
Disclosure: I own Citi in my personal account and have a profitable position in my "explore portfolio" with the last trade a buy at $2.95.

1 comment:

  1. Jim Cramer is pounding the table bullish on Citigroup today on "Mad Money" with comments like

    "I think it could triple "

    "I predict it will trade at $12 in 3 years."

    "I think Pandit (new CEO) did a good job of turning the bank around, given the condition it was in." He blamed Prince and Rubin for making a great bank terrible.

    Jim suggests it will bottom when it offers the new shares which could be as early as tomorrow night.


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