Citigroup won't be getting a new corporate jet, after pressure from United States president Barack Obama over how banks are spending government bailout money.

One of the largest US banks reversed course, Citigroup announcing that it will not take delivery of the jet it had planned to purchase before the credit crisis unfolded.

The White House reached out to Citigroup on Monday to reiterate Obama's position that such jets are not "the best use of money at this point," calling them 'outrageous' spending for a company getting taxpayer dollars, said a White House official who spoke on condition of anonymity because the official was describing private conversations.

In a statement late Monday, Citigroup Inc said it paid a deposit in 2005 to acquire the jet.

The New York-based bank said it did not plan to use government money for the purchase, and it noted that any cancellation of the deal would probably lead to multimillion-dollar penalties.

On Monday, The New York Post reported that Citi was set to take possession of the jet even after receiving US$45 billion from the government.

The government is also providing guarantees on hundreds of billions of dollars of Citi investments in mortgages and other troubled portfolios.

With the cancellation of the jet deal, a deposit on the plane will be lost, but is recoverable once the jet is sold, according to a person familiar with the situation. Citi was in the process of purchasinga Dassault Falcon 7X for $50 million, the person said.

Citi is also planning to cut the number of corporate jets in its existing fleet from five to two, said the person, who also spoke on condition of anonymity because the details have not been made public.

Citi may have to wait awhile to recover its deposit on the cancelled jet deal, as the market for corporate aircraft has softened with the economy.

Robert F. Agnew, president and chief executive of aviation consulting firm Morton Beyer & Agnew said buyers typically pay a few percentage points of the purchase price when placing the order, then a series of payments as production begins and other milestones are reached.

- AP