Trader Talk

Treasury Makes Money on Citi Bailout

For everyone who thinks the government is wasting money helping banks out, UBS pointed out this morning that the recent conversion of Citigroup's preferred shares into common has netted the Treasury a $10 billion (unrealized) profit.

Treasury converted $25 billion of their $52 billion in preferreds at $3.25, and with the closing yesterday at $4.48 the stock has appreciated over 40 percent.

Each penny increase in the stock price produces a $76 million unrealized gain.

Will the Treasury take profits? UBS says, "As we understand it, the Treasury isn't restricted as to when it can sell its common stake, & while it may be a bit early and we think the sale of their common stake isn't imminent (though it would be nice to make a big profit while saving the system & getting out), we also don't think of them as a long-term holder."



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