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 deal is the beginning of the end of Citigroup's acrimonious dalliance with the government, which bailed the bank out with three rescues last year and this year but also pressured Citi to sell businesses and remove executives.
Citigroup's exit from the Troubled Asset Relief Program, which follows a similar move by Bank of America Corp, puts even more pressure on Wells Fargo & Co
Executives of Citigroup, Goldman Sachs
As part of the deal with Citigroup, the U.S. Treasury will sell up to $5 billion of Citigroup stock it holds alongside the bank's $17 billion offering. The bank's offering may swell to $19.55 billion if investor demand is high enough.
Bank of America Corp
Citigroup's capital raising this week also includes the sale of $3.5 billion of tangible equity units, which have characteristics of debt and equity.
In January, Citigroup will issue $1.7 billion of common stock equivalents to employees in place of cash they would have otherwise received.
When the transactions are done, the bank will be left with a Tier 1 common ratio of 9 percent, putting it above Bank of America's 8.4 percent and JPMorgan's 8.2 percent, according to a Citigroup presentation to investors.
The Treasury said it was pleased Citigroup was moving forward with the plans.
While much work lies ahead to improve lending and spur job creation, today's announcement by Citigroup takes us another step in the right direction, the Treasury Department said in a statement.
The bank also said it might issue up to $3 billion of trust preferred securities in the first quarter of 2010.
Citigroup borrowed $45 billion last year under TARP. 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 shares were down 1 cent at $3.94 in trading before the market opened.
(Reporting by Christopher Kaufman; Editing by Lisa Von Ahn and John Wallace)