With $27 bn worth shares, US gets only 7.8% of Citi

The US will own shares worth $27 billion and would be paid an estimated $4 billion in annual dividends for rescuing Citigroup, but it is still far away from being called nationalistion of the banking behemoth, where government holding would be capped at only 7.8 per cent.

At the time when the deal was struck, the total market capitalisation of the bank stood at just over $20 billion, while the federal authorities are getting only 7.8 per cent stake in the bank for purchasing shares worth $27 billion.

After yesterday's rally of 58 per cent in its shares, the bank's market cap currently stands at $32.4 billion.

As part of the package, Citi would issue warrants to the US Treasury and the Federal Deposit Insurance Corp (FDIC) for 254 million common stock shares at a price of $10.61, which is more than double the market price of less than $4 when the deal was reached.

Asked if the rescue package would lead to nationalisation of the bank, Citigroup's Chief Financial Officer Gary Crittenden told business news channel CNBC, "It cannot be called a nationalisation in any sense."

Noting that the government's ownership stake would be limited at 7.8 per cent in Citigroup, Crittenden said that the pact with the federal authorities could not be called a nationalisation and the pact underlined the bank's "strength to be proactive" and it had a strong tier-one capital ratio.

Further, the preferential shares being issued to the government has no voting rights, except for in cases like merger and acquisition and issuance of shares.