Citi near deal with government - report

The Wall Street Journal says an announcement could come Thursday. Citi could lose its hold on a major Mexican bank.

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NEW YORK ( -- Citigroup is nearing an agreement with federal regulators to increase the government's stake in the bank to as much as 40%, according to a published report.

A deal could be announced later Thursday, the Wall Street Journal reported, citing people familiar with the situation.

The government has already invested $45 billion in Citi as part of the Treasury Department's Troubled Asset Relief Program. A report in the Journal last week said some of that investment could be converted into preferred stock under the deal being discussed, which would give the government greater control over the company.

The Journal said some Citi executives are concerned that the deal could force the bank to give up some or all of its ownership of Grupo Financiero Banamex, the No. 2 bank in Mexico by assets.

Mexican law bars any institution that is more than 10%-owned by a foreign government from running a bank in that country, according to the report.

Banamex is the "crown jewel" of Citi's (C, Fortune 500) overall operations and divesting would be a major blow to the bank. The matter will probably have to be resolved "through diplomatic channels," the report said. To top of page

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