Citigroup (C) Working To Raise More Capital

Citigroup (NYSE: C) told US regulators it wants to fill the capital shortfall identified in the government's "stress test" by selling some of its businesses, asking more investors to convert their preferred shares into common stock and reducing its balance sheet, according to the Financial Times

With only a few days to go before the "stress test" results are released, Citi is trying to find ways to raise capital without relying on more government funds. Citi has already been bailed out by the government three times.

The FT also said Bank of America (NYSE: BAC) is also in talks with regulators over its capital needs and the possibility of converting the government's preferred shares into common stock.

Citi argues that the $5.2 billion sale of Japan's Nikko Cordial, the expansion of an existing conversion offer, and renewed efforts to cut costs ensure it has enough capital to withstand the crisis.

The FT reported that people in the know said both Citi and Bank of America were refuting some of the conclusions of the stress tests. In Citi's case, the executives said the estimated losses on credit cards is too high. Bank of America executives have also told the authorities it expects lower losses than they projected.

Analysts have estimated Bank of America could need up to $70 billion in new equity.

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