Citibank's US$306 bn tocix assets guaranteed

 Citigroup also will get a $20billion cash infusion from the Treasury Department, adding to the $25 billion the bank received last month under the Troubled Asset Relief Programme. In return for the cash and guarantees, the government will get $27 billion of preferred shares paying an 8percent dividend.

With the US government outlining a massive rescue package for Citigroup, Citi Thailand yesterday insisted its operation remains strong and stable.

"Today's announcement brings even greater clarity to our overall financial strength and ability to deliver the best service to our clients. We hope it puts to rest the unfounded rumours on our financial position and brings the focus back to the fundamentals of our global franchise.

"Throughout these difficult markets, Citi Thailand has maintained strong and stable operating income, unparalleled access to funding, extraordinary levels of liquidity and the best talent in the business. Our business is strong and our support for our clients has been unwavering.

This announcement sends a strong signal to all our clients here in Thailand about our continued commitment to serve them as we have been doing for over 40 years," said Peter Eliot, Citi's country officer.

The US Treasury, Federal Reserve and Federal Deposit Insurance Corp said in a joint statement late Sunday that the move to shore up Citigroup aims to bolster financial market stability and help restore economic growth. The decision came after New York-based Citigroup's tumbling share price sparked concern that depositors might pull their money and destabilise the company, which has $2 trillion of assets and operations in more than 100 countries.

"It really was a mustdo thing," said Nader Naeimi, a Sydneybased strategist at AMP Capital Investors, which manages about $85 billion. "If they'd let Citigroup go, that would've been disastrous."

Citigroup's stock has plunged 83 per cent this year and dropped below $5 last week for the first time since 1995. The bank, which two years ago was the biggest by market value, has slipped to No 5 after racking up four straight quarterly losses totalling $20 billion amid the worst financial crisis since the Great Depression.

The government's preferred shares come with warrants to buy 254 million Citigroup shares at $10.61 each, allowing taxpayers to profit if the stock rallies following the government's investment, according to a term sheet that accompanied the agencies' statement.

Citigroup is required to cut its quarterly dividend to 1 cent a share from the 16 cents paid this quarter.

"With these transactions, the US government is taking the actions necessary to strengthen the financial system and protect US taxpayers," the agencies said.

Terms of the asset guarantees mean Citigroup will have to swallow the first $29 billion of losses on the $306 billion pool, in addition to any reserves it already has set aside. After that, the government covers 90 per cent of the losses, with Citigroup covering the other 10 per cent.

Unlike the bailouts of insurer American International Group and mortgage companies Fannie Mae and Freddie Mac, no management changes were required and CEO Vikram Pandit gets to keep his job, government officials said.

Pandit, 51, revealed a plan last week to eliminate 52,000 jobs and cut costs by about $2 billion per quarter. He and three top deputies bought 1.3 million shares in a show of confidence, and Prince Alwaleed bin Talal, one of the bank's biggest investors, said he would boost his stake to about 5 per cent from 4 per cent.

Citigroup also issued a statement last week saying the company had "a very strong capital and liquidity position and a unique global franchise", and Pandit held two conference calls with employees to reassure them.

The stock kept plunging, forcing the bank's board to hold an emergency meeting on Friday and thrusting executives into a weekend of discussions with the Fed and Treasury.

The added capital and the asset guarantees are intended to provide confidence to investors that the bank has a big enough loss cushion to absorb bad loans as unemployment climbs and the economy sours.

Citigroup remains vulnerable to losses on loans and securities outside the US, said Peter Kovalski, a portfolio manager at Alpine Woods Capital Investors in Purchase, New York, which oversees $8 billion and holds Citigroup shares.

The government plan "gives them a little bit of breathing room, but longer term, things may deteriorate and losses increase," said Kovalski.

"The Achilles heel with Citi is their exposure to emerging markets and what's going to happen when emerging markets turn down, as they're doing now."