Singapore’s GIC to keep investments in Citigroup

December 19, 2009
Singapore Democrats

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AFP

The Government of Singapore Investment Corporation (GIC) said Friday it will keep its stake in Citigroup in a vote of confidence for the US banking giant, whose shares tumbled this week.

The Singapore sovereign wealth fund said its holdings in Citigroup has been diluted to “approximately 4.0 percent” from 4.9 percent after the bank’s latest round of capital-raising to repay 20 billion US dollars in federal aid.

Citigroup was among the major Western lenders most affected by the financial crisis and it needed a US government bailout and capital injection from other cash-rich investors, including GIC.

Its stock has taken a beating over the past week on Wall Street, falling around 20 percent after weak demand for a share offering that prompted the US government to delay the sale of its stake in the bailed-out banking giant.

Citigroup said late Wednesday its share offering — described as the largest offering in US history — saw prices of 3.15 dollars per share.

This was well below the average price paid by the US government as part of a multibillion-dollar bailout under the Troubled Asset Relief Program (TARP). That prompted the Treasury to delay its plans to divest an initial five billion dollars, placing the bank under heavy selling pressure Thursday.

GIC said it backed Citigroup’s decision to repay the US government. “As a shareholder, GIC views Citigroup’s plan to repay the US government as a positive development in the company’s recovery,” a spokeswoman said.

“GIC will continue its investment in Citigroup as we are confident of its long-term prospects”.

The fund invested 6.88 billion dollars in Citigroup’s private offering of convertible preferred securities last year in a bid to boost its capital base.

The new woes for Citi, which received the biggest bailout of any US bank at some 45 billion dollars, led to fresh turmoil in financial markets, undermining confidence in a recovery for the ailing sector.

The US government earlier this year converted some of its preferred shares to take a stake of common stock worth around one-third of the bank.

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