JANUARY 26, 2011, 10:26 A.M. ET.

TARP Profit on Citigroup: $12.3 Billion

By TOM BARKLEY

WASHINGTON—The U.S. is set to record a net $312.2 million from its sale of its final 465.1 million warrants to purchase common shares of Citigroup Inc., the Treasury Department said Wednesday.

The sale of the warrants, expected to close Monday, will allow the government to dispose of the remaining stake in Citigroup obtained through the Troubled Asset Relief Program, or TARP.

Overall, taxpayers are expected to end up with a $12.3 billion profit on the government's $45 billion investment in the company during the 2008 financial-sector bailout. Last year, Treasury sold its 34% stake of common shares of Citigroup.

"As we exit our investments in private companies and recover taxpayer dollars, it's clear that the cost of the TARP program will be a fraction of what many had once feared during the depths of the crisis," Tim Massad, Treasury's acting assistant secretary for financial stability, said in a statement.

Citigroup welcomed the announcement.

"With a full year of profitability behind us, we have built a strong foundation for sustainable and responsible growth," said Jon Diat, managing director in financial communications at the bank.

Last month, Treasury trimmed its estimate for how much the $700 billion TARP will end up costing taxpayers by about $1 billion to $28 billion, with estimated gains from its investments in banks and American International Group Inc. expected to partially offset losses in its foreclosure prevention programs. The nonpartisan Congressional Budget Office has put that figure at about $25 billion.

Treasury continues to wind down the program, planning later this year to unload big stakes in insurance giant AIG and auto-finance company Ally Financial Inc., formerly known as GMAC Financial Services Inc.

It also recently announced plans to auction warrants in Boston Private Financial Holdings and Wintrust Financial Corp.

The government will still own a modest interest in Citi, through Trust Preferred Securities held by the Federal Deposit Insurance Corp. The FDIC must turn over the securities, with a principal value of $800 million, to Treasury unless it incurs any losses on debt of Citigroup guaranteed by the FDIC under the Temporary Liquidity Guarantee Program.

Banks accepting TARP money were required to provide the Treasury with warrants to maximize returns on the taxpayer funds. The Treasury has been auctioning its warrants over the past several months as banks have repaid their government loans.

Citigroup's share price would have to more than double for new holders of the warrants to exercise them, with shares recently up 0.4% at $4.84.

The warrants have a range of expiration dates and strike prices. They expire from Oct. 28, 2018 to Jan. 15, 2019, with a strike price between $10.61 and $17.85.

The warrants were sold through a Dutch auction method, which sets a market price by allowing investors to submit bids above a minimum price specified for each auction. Deutsche Bank Securities was in charge of the sale.

Write to Tom Barkley at tom.barkley@dowjones.com

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