Citi Preferred Conversion Delay Hits Stock

Updated from 2:52 p.m. EDT

Citigroup (C) shares fell as much as 11% on Friday after the company said that it planned to delay the conversion of the U.S. Treasury's preferred stake to common shares until after the stress tests were completed.

The news came as the New York-based institution reported first-quarter results that amounted to a narrower-than-expected loss of 18 cents a share, due to the conversion of convertible preferred stock issued last year into common shares.

The bank reported net income of $1.6 billion and net revenue of $24.8 billion, thanks to strong trading activity in its investment bank. But the results were diluted on the conversion of $12.5 billion convertible preferred stock issued in a private offering in January 2008. The new stock reduced income available to common shareholders by $1.3 billion, or 24 cents a share. Dividends paid to preferred shareholders also cut into income available to common shareholders by $1.3 billion.

Analysts polled by Thomson Reuters had expected a loss of 34 cents a share on revenue of $21.94 billion.

Citigroup reported a loss of $5 billion, or $1.03 a share, in the same period a year earlier.

The company said in a separate release that it continues to finalize its documentation for the U.S. government to convert up to $25 billion of its preferred stake to common shares and the firm is working to complete customary Securities and Exchange Commission review process with respect to the exchange offers announced in late February.