Citi to Delay Stock Swap with Treasury

NEW YORK CITY-Citigroup’s previously announced stock swap with the Treasury Department, in which the federal government will convert up to $25 billion of its TARP shares into common stock, is being put on hold until the results of the bank’s stress test come back. The swap is part of the plan Citigroup announced on Feb. 27 to exchange common stock for up to $27.5 billion of its existing preferred securities and trust preferred securities at a conversion price of $3.25 a share, with Treasury matching up to $25 billion.

In a release, Citigroup cites the SEC review process of the Feb. 27 plan, which is “not yet complete,” and the imminent release of results of the stress tests the Federal Reserve Bank of New York is conducting on the nation’s 19 largest financial institutions. Bloomberg News, citing an anonymous source, says the test results will be released on May 4.

“This securities exchange has one goal–to increase our tangible common equity,” Citigroup CEO Vikram Pandit said in February when the stock-swap plan was announced. “While we believe Tier 1 capital remains the most important measure of the financial strength of banks, we recognize that the markets also view TCE as an important measure.”