Citigroup to sell $3 bln in stock; shares fall

By Jonathan Stempel and Dan Wilchins

NEW YORK (Reuters) - Citigroup Inc (C.N: Quote, Profile, Research) said on Tuesday it plans to sell $3 billion of common stock to bolster its capital levels, sending its shares down in after-hours trading.

The largest U.S. bank is raising capital after suffering a $15 billion net loss over the last two quarters, and reporting more than $45 billion of write-downs and credit losses since June 30.

Chief Financial Officer Gary Crittenden said in a statement that Citigroup had received "strong" interest in the public offering. The company said the issue may grow in size.

Since late 2007, Citigroup has raised more than $36 billion of capital, including last week's sale of $6 billion of preferred stock. The bank is also selling assets, such as a $12 billion leveraged loan portfolio it sold this month to private equity investors.

Analysts said selling shares makes sense after Citigroup stock rose 46 percent from the low of $18.00 on March 17, a level not seen since October 1998, on optimism that the worst of the write-downs may have passed. The offering is the first in Citigroup's recent capital-raising to involve common stock.

"Obviously it's dilutive, but it's smarter than going out and having to pay a high premium for a preferred issuance." said William Smith, chief executive of Smith Asset Management in New York, which owns Citigroup shares.

Citigroup plans to sell the stock on Wednesday, people briefed on the matter said.

The U.S. Federal Reserve is also widely expected to cut interest rates that day. If the central bank suggests that stability is returning to the financial system, bank stocks may rally, which could help Citigroup get a better price for its shares.