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Citibank to pay back US bailout funds

world Updated: Dec 15, 2009 00:18 IST
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Citigroup unveiled plans on Monday to repay 20 billion dollars in government aid and outlined a plan to emerge from a massive bailout, in a fresh sign that the banking sector is closer to standing on its own.

Citi, which was kept afloat by a series of state rescues during the financial crisis, said it would sell 20.5 billion dollars in new securities under the plan to replace the capital aid.

The proceeds will be used to buy back the preferred shares held by the US Treasury under the Troubled Asset Relief Program (TARP).

The plan also calls for the Treasury to sell five billion dollars of the common stock held in Citi and “to sell the remainder of its shares in an orderly fashion over the next six to 12 months,” a Citigroup statement said.

The rescue of Citigroup was the most extensive for the US banks hit by the financial crisis last year.

The government injected a total of 45 billion dollars in the firm, once the world’s biggest banking group. It converted a portion of that to common stock earlier this year in exchange for a stake of around 34 per cent in Citi.

Wall Street on high

Wall Street rose at the open on Monday on the heels of a global rally as sentiment was boosted by Abu Dhabi's decision to bail out Dubai and Citigroup’s move to exit a US government bailout.

“Traders appear to be reacting positively to news that Citigroup has reached a deal to repay some 20 billion in TARP funds,” said Joseph Hargett at Schaeffer’s Investment Research.