The U.S. government will officially take a 34 percent equity stake in Citigroup Inc on Thursday, becoming the bank's largest shareholder in connection with a February bailout.The change follows the completion of two exchange offers designed to bolster the capital position of the nation's third-largest bank, widely considered the most troubled of the biggest U.S. lenders.
Investors have agreed to swap US$32.8 billion of preferred securities for common stock, and the government will swap US$25 billion. Citigroup conducted the offers after heavy credit losses and writedowns prompted a series of bailouts, including a US$45 billion injection of taxpayer funds from the Troubled Asset Relief Program. The bank increased the total size of the offers by US$5.5 billion after regulators ordered it to build that buffer following a "stress test" of its ability to handle a deep recession.
The exchange offers will leave Citigroup with more than 21 billion shares, up from 5.51 billion at the end of June. Citigroup has said it may conduct a reverse stock split before June 30, 2010, that would increase its share price, which has hovered near US$3 for much of the year.