Citigroup explores the reduction of U.S. government involvement

New York, Sep 15 (MarketWatch) .- Citigroup, eager to remove the stigma of being a subsidiary of the U.S. government is drafting a plan to reduce 34% stake that the state keeps the financial giant.

Senior executives from Citigroup have been drawing up plans for a possible public stock sale of billions of dollars, while the Treasury would sell at least a portion of the stake in Citigroup, according to sources close to the deal told The Wall Street Journal.

Negotiations are at a preliminary stage, sources said, and Citigroup has not yet officially submitted this operation to the U.S. Treasury, but expect it soon.

Representatives of the entity and have discussed their plans with bank regulators, financial sources said.

Last week, the Treasury Department purchased 7,700 million shares of Citigroup.

The federal government got that participation in exchange for a portion of its preferred stock group, which the Treasury received when injected 45,000 million dollars in Citigroup.

The conversion of preferred shares into common stock agreed to in the second quarter, when rumors swirled about the health of Citigroup's capital levels.

The advance request from Citigroup to start reducing government involvement reflects the rapid rebound in Wall Street about the dark days of financial crisis.

It could also provide a preliminary test of how the government of President Barack Obama combines his desire to begin to reverse the major interventions in the financial system with the concern still exists about the health of the banking industry in general and in particular Citigroup .

Although Citigroup has reported net profits in the last two quarters, the company still has to deal with an increase in loan defaults and still tens of billions of dollars of risky assets.

Even before the Treasury Department obtained the shares of Citigroup, its officers were examining how to reduce government involvement.

The aim is a joint sale of shares and Citigroup would issue up to 5.000 million in new shares, while the government simultaneously sell an undetermined number of shares it controls, sources said.

Executives hope that a sale of this type may occur in the fourth quarter of this year.

Citigroup could use the capital gains from the sale of shares to buy some of the preferred stock that controls the government, sources said, while bank executives argue that the company would issue shares only if the Treasury also agreed to sell shares.

Spokesmen for Citigroup and the Treasury Department declined comment.

If the U.S. sells some of its shares of Citigroup, taxpayers could make a profit.

The government converted its preferred stock into common shares at $ 3.25 per share, while Citigroup shares closed yesterday at $ 4.52, which means that the 7,700 million shares of government have increased in value 9,800 million dollars.