Citigroup has mentioned to U.S. Treasury officials a plan to unload some of the government's 34 percent stake in the company, people familiar with the matter told CNBC.
Sources said there have been no actual talks or negotiations yet between the two sides, but that discussions could happen soon.
The Treasury Department acquired 7.7 billion shares of Citigroup stock last week.
The federal government received that stake in return for a chunk of its holdings of Citigroup preferred shares, which the Treasury received when it pumped $45 billion into Citigroup.
Published reports suggest the company is considering a secondary share issue of as much as $5 billion along with the government selling a portion of its stake, possibly in the fourth quarter.
In general, Treasury officials have made it clear they are open to being repaid by institutions with which they have investments, but that the bank must demonstrate it has adequate capital and liquidity.
It must also have the right proportion of its capital in equity against debt.
As a result, Citigroup cannot replace the common stock held by the government with debt, but must either conduct a secondary issue or find a buyer for the government's stake.
Treasury Secretary Tim Geithner recently told CNBC that government programs were moving into a phase of winding down but warned that the government had to be careful not to act too quickly.
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Citigroup’s expected request to start shedding the government stake reflects Wall Street’s rapid rebound from the troubled days of the financial crisis, the Wall Street Journal reported.
The government would make a profit if it sold part of its stake, as shares have gained about $9.8 billion since the Treasury converted its preferred stock in Citi into common stock, the paper said.