Citigroup Slides; Treasury Resumes Sales

Citigroup shares were slightly lower in late morning trades after the Treasury Department said it's resuming open-market sales of its stake in the bank.
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(C) - Get Report

shares slipped Friday after the Treasury Department said it's resuming efforts to pare down its stake in the bank.

The stock was down 1.6% to $4.03 in recent trades. Volume of nearly 128 million compared to the issue's trailing three-month daily average of 749 million.

The Treasury has authorized

Morgan Stanley

(MS) - Get Report

, its sales agent, to sell an additional 1.5 billion Citigroup common shares, which the government received in its bailout of the bank. This is the third in a series of pre-arranged trading programs for the Treasury since late April, and it follows a halt to the program around Citigroup's

second-quarter report

last week.

The plan will terminate on Sept. 30, even if all the shares have not been sold, as the government plans to once again halts the stock sales ahead of Citigroup's third-quarter report in mid-October.

The government originally received 7.7 billion shares of Citigroup common stock last summer when the Treasury exchanged the $25 billion in preferred stock it received in connection with Citigroup's participation in the TARP Capital Purchase Program. The exchange rate used in the conversion puts the government's cost at $3.25 per common share.

The Treasury

has already sold 2.6 billion Citigroup shares in two separate trading programs, grossing $10.5 billion in proceeds. The sales have brought the Treasury's stake in the bank down to 18% from a prior 27% level.

Analysts, a majority of which were already positive on the stock seem to be growing increasingly comfortable with Citigroup's ability to remain


and its capital position, particularly as the bank continues to focus on its

international businesses

for growth.

Based on Thursday's closing price at $4.09, the stock was up nearly 9% for the month and 24% for the year.

Market participants have speculated that the U.S. Treasury would like to be fully exited from its stake in Citigroup by the end of the year.

However Rochdale Securities analyst Dick Bove believes the government prefers that Morgan Stanley sell the stock "as the market dictates, rather than forcing the stock into a market that does not want it," Bove wrote in an e-mail. "This could take another few months or a year if the market collapses."

--Written by Laurie Kulikowski in New York. Maria Woehr also contributed to this report.

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