KUWAIT’S SOVEREIGN wealth fund has made a profit of $1.1 billion (€739 million) after selling its 5 per cent stake in Citigroup for $4.1 billion less than two years after acquiring preference shares in the largest US bank during the global financial crisis.

Kuwait Investment Authority (KIA) converted preferred stock in Citigroup that it purchased for $3 billion last year into common shares and sold them, earning a 37 per cent return on its investment. The sale comes as Citigroup is set to intensify efforts to break free from US government emergency bank funding programmes.

Citigroup is racing against the clock to convince US authorities that it be allowed to repay $20 billion of bail-out funds, with insiders and regulators arguing that unless the bank acts within the next 10 days it will have to wait for more than a month.

The short window for a decision on the repayment of funds from the troubled asset relief programme (Tarp) raises the stakes for Citigroup in its quest to free itself from the shackles of the government, which also owns a 34 per cent stake in the lender.

Citi’s need to pay back the Tarp funds has been heightened by last week’s surprise announcement that Bank of America had raised $19.3 billion to repay $45 billion.

People close to the situation said that unless Citi could launch the capital-raising effort required to repay Tarp by the middle of next week, it would become practically impossible to do so until after it reports results in mid-January.

Sovereign wealth funds, which are valued at $3.2 trillion, are selling investments in financial stocks as they seek to reduce risk and address domestic criticism over investment priorities.

The funds had become sources of capital for companies including Citigroup and US investment bank Morgan Stanley, helping them to withstand the credit market seizure following the US subprime mortgage collapse. – (Bloomberg/Financial Times)