The Treasury — and by extension taxpayers — took on more risk when it agreed to convert some of its preferred shares of Citigroup to common equity. But it certainly seems to be reaping the rewards.
UBS analysts figure that Geithner & Co. are currently in the money to the tune of some $10 billion, since they converted $25 billion dollars in preferred shares — out of a $52 billion preferred stake — at a price of $3.25. “Each penny increase in the stock price produces a $76 [million] unrealized gain,” wrote UBS’ Glenn Schorr in a note out early Friday. Citi shares are currently trading around $4.70, since the end of July they’re up roughly 48%.
With those kinds of paper gains, it seems natural to wonder whether Treasury will sell to lock in those profits. It’s not likely to happen just now, writes Schorr. “Don’t forget the govt still has big stakes in BAC, WFC, and others, and needs to be mindful of the signal a sale would send. Still, we wouldn’t be
surprised if they eventually put together a paydown schedule.” Oh, and besides the cool $10 billion Treasury stands to net, Schorr points out that the government still has some has $27 billion in preferred shares that Citi needs to repay at some point, which could represent another $2 billion or so annual return.
As a sharp-eyed MarketBeat editor pointed out, Mr. Schorr’s own UBS knows a thing or two about a government getting a good return on its stake in a bank.
Keine Kauf Empfehlung!!
Spekulativ .Call auf AIG DE000CG1HCW2
Devise: "Kaufen, wenn alle anderen verkaufen"
Investieren in die Zukunft CORD BLOOD AMER INC
WKN: US21839P1075 &
AU000000CIG9 
Zurück
Weiter
Werbung
