Citigroup Inc, having finally shed its status as a US government ward, is no longer handicapped when competing for business - or for the people who can attract it. "CEO Vikram Pandit and his lieutenants had to have breathed a huge sigh of relief," said Michael Holland, chairman of money manager Holland & Co, which owns Citigroup shares.
-- Citi, free of US stake, better-positioned for growth
-- Improved reputation seen helping hiring, new business
"They can now run the business like a business rather than a political entity - that's a huge difference," he said.
Investors broadly hailed the US Treasury's announcement that it had sold its remaining stake in Citigroup, finally unwinding an ownership interest that in April amounted to a 27 percent stake. Citigroup shares closed up 3.8 percent at $4.62 on December 07 - a seven-month high.
The sale closed a long and difficult chapter for Citigroup, which received $45 billion in three government rescues during the financial crisis. The bank has returned to profitability this year but struggled to rebuild its reputation under the stigma of being a government ward.
"To finally get that albatross off from around its neck, it's a great thing," said Alan Villalon, a senior banking analyst at Minneapolis-based First American Funds, which owns Citigroup shares.
Citigroup has said the government did not dictate business decisions to the bank and its executives. "But when you've got the government as your largest shareholder, it still creates some doubt in people's minds," Villalon said.
Those people include potential employees and clients, who for a long time were alienated by Citigroup's frail reputation. Investors and analysts partially blamed that reputation for Citigroup's loss of high-profile and high-return investment banking business this year.
"The longer they were technically and legally wards of the state, the harder it was for them to portray themselves as credible market players," said Cornelius Hurley, a professor and director of Boston University's Morin Center for Banking and Financial Law.
Now, "they're mending, to all appearances, but it's still a very fragile economy and there are still some fairly large issues floating around," he said.
Citigroup is not yet entirely free of US government support. The Treasury said it would continue to hold warrants to purchase Citigroup shares issued as part of the bailout. The government is also entitled to receive some $800 million in Citigroup Trust Preferred Securities from the Federal Deposit Insurance Corp under a debt guarantee program - provided that the FDIC incurs no losses on Citigroup debt it backstopped during the financial crisis.
Nor is Citigroup finished with cleaning up the effects of the financial crisis. CEO Pandit is still trying to sell off some $400 billion of assets he considers unrelated to the bank's main businesses.
Also, like other big US banks, Citigroup still could be forced to buy back mortgages repackaged into troubled bonds and could also be squeezed if the crisis at the periphery of the eurozone worsens, Hurley said.
And the bank, whose shares have gained 21 percent this year, about in line with the sector, is no bargain. They trade at about 1.01 times tangible book value - cheaper than J. P Morgan Chase & Co but slightly more than Bank of America Corp, according to Villalon's estimates.
Still, investors said they expect Citigroup's new-found freedom from government ownership to help it attract new talent - and eventually new business.
"In terms of hiring people and even retention, it's a major plus," Holland said.
Before, "for anyone who was thinking about two different places - one with the government looking over your shoulder and one a free-society kind of place - it was clear that Citi was at a disadvantage," he said.
Investors said that hiring will help the bank's ambitions to expand abroad, especially in emerging markets like South Africa, where Pandit said that Citigroup is focusing on investment and corporate banking.
"Just in terms of building the relationships with people, time and profits will rebuild everything," Villalon said. "People now look to Citi to generate consistent profits. The company's getting back to some sort of stability that'll give comfort that a lot of issues of the past have been behind them."
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