Stephen Green, the chairman of HSBC, said yesterday that his group would buy some of Citigroup’s business if the American bank decided that it needed further capital in addition to the Government’s latest cash injection.

Speaking on the sidelines of the CBI conference in Central London, Mr Green said: “We have a clear strategy to develop our business with a focus on emerging markets, and that means Asia, the Middle East and Latin America . . . We will not acquire things that do not fit in with our strategy.” Nevertheless, he confirmed that where something fitted, HSBC would look at it.

Mr Green’s comments came after weekend reports that HSBC was considering buying some of Citigroup’s assets if they were offered for sale, and that it was particularly interested in businesses in Brazil, Argentina and Mexico. Any sale is not likely to be imminent, because Vikram Pandit, the chief executive of Citigroup, said as recently as Friday that he did not want to break up the group.

However, it is likely that the US Government will have a say in whether any deal is struck because, although it did not take a controlling stake in return for its rescue of Citigroup, there is little doubt that Washington is now the bank’s de facto boss.

As part of the agreement, under which the Government will inject a further $20 billion (£13.3 billion) into Citigroup and guarantee most of the losses on $306 billion of toxic assets, it will have the right to cut the pay packages and bonuses of executives and will rule on the perks of executives.

Citigroup’s investors, who have lost much of their shares’ value in the past few weeks, also face a significant reduction in income from the stock. The Government requires Citigroup to pay no more than one cent a share in quarterly dividends for the next three years, down from 16 cents in the third quarter.

Washington has stopped short of demanding management changes, although it will appoint two directors to the Citigroup board. It also wants the terms of some high-risk mortgages to be rewritten to help cash-strapped homeowners to meet payments. It is hoped that the blueprint will reduce the number of foreclosures and, in turn, Citigroup’s losses, and help to stabilise the broader housing market.

The conditions, in what could amount to the largest bailout of a single bank in American history, will lead to the Government taking greater control than in any of its other recent banking rescues. In return, it will guarantee 90 per cent of any losses that Citigroup suffers on a designated $306 billion package of assets, except for the first $29 billion, which Citigroup must absorb. The assets entail troubled residential and commercial mortgages and related securities, as well as corporate loans. The Government will guarantee the residential mortgages for ten years and the commercial mortgages for five years.

The losses on these toxic assets are predicted to be as high as 50 per cent, or about $150 billion, which would leave the taxpayer with a bill of nearly $110 billion. The Government will claw back some of that through the $27 billion of preferred shares that it will receive. These pay an 8 per cent dividend. It has also taken warrants to buy 254 million Citigroup shares at $10.61 each, potentially helping taxpayers to further offset their losses if the rescue package proves a success and the share price rises.

However, even with Citigroup’s share price increasing by $2.24 to $6.01 yesterday morning, the stock was well below the point at which the warrants could be exercised profitably. Should the Government choose to exercise these warrants, in addition to those that it received as part of its first $25 billion capital injection, it would have a 7.8 per cent stake in Citigroup.

The Government’s rescue package was one option discussed over the weekend by Citigroup executives and officials at the Treasury Department, the US Federal Reserve and the Federal Deposit Insurance Corporation. They were scrabbling to reach agreement on a rescue deal before the markets opened yesterday, after a 60 per cent slide in Citigroup’s shares last week, which, if unchecked, could have threatened the group’s long-term viability.

Although Citigroup did not face an immediate capital shortage, the loss of confidence associated with its plunging share price could have prompted customers and clients to cut their ties with the bank, ultimately forcing it into bankruptcy.

Until late on Sunday, when the deal was clinched, the favoured option had been to create an independent “bad bank” to house about $50 billion of Citigroup’s most risky assets. As with the agreed deal, Citigroup would have absorbed the initial losses on these assets, with the taxpayer picking up the tab for the rest. In the end, the Government decided to guarantee a much larger portion of Citigroup’s high-risk assets but resolved that they would be kept on the bank’s balance sheet.

Another option discussed was for the Government to issue a statement of confidence in the bank in the belief that this would reassure shareholders, customers and clients because the Government would not endorse Citigroup unless it had carefully analysed the risks on the balance sheet and determined that it had sufficient capital to meet further losses.

However, it became apparent that such a statement would not have been enough to halt the share-price slide and that Citigroup needed a considerable amount of additional capital.

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