By David Henry
NEW YORK, March 7 Citigroup Inc said on
Thursday it has asked the Federal Reserve for permission to
spend $1.2 billion to buy back its own stock through next March
but has not asked to raise its quarterly dividend.
The company's announcement came after the Federal Reserve
released results of its stress tests of bank capital, which
showed Citigroup scoring better than a year ago.
Analysts, on average, had expected Citigroup to raise its
quarterly dividend after the stress test to 10 cents a share
from the current 1 cent, according to Thomson Reuters I/B/E/S.
Many had also expected the company to ask to spend a nominal
amount on buybacks after its bid last year to return capital was
Analyst Anthony Polini of brokerage Raymond James called
Citi's buyback request "very conservative."
The Fed said in its instructions to banks for submitting
capital plans that it expected them to be "conservative" in
requests to increase dividends. Compared with spending for
buybacks, regulators and bankers say, dividends are more of a
commitment to keep making payouts in the future even if profits
At Citi's closing share price of $45.00 on Thursday, the
$1.2 billion would buy back roughly 27 million shares,
representing less than 1 percent of Citi's total outstanding
Citigroup said it had scored itself marginally better than
had the Fed under same hypothetical stress scenario on capital.
Citigroup figured its Tier 1 common equity ratio would fall no
lower than 8.4 percent, while the Fed put the figure at 8.3
percent. Five percent is the minimum under bank regulations.
The Federal Reserve has said it will announce on March 14
whether it has approved capital plans banks submitted in early
Under a stress test last year, the Federal Reserve said
Citigroup's capital ratio would have fallen to 4.9 percent under
the capital plan the company proposed and the regulator
At that time, some analysts had expected that the company
would be allowed to spend as much as $5 billion of its capital.
The test failure was a major embarrassment for the company
and contributed to friction between then Chief Executive Vikram
Pandit and company directors, who in October pushed him out.
The test scores the Fed released on Thursday for 18 big
banks showed Citigroup with perhaps the biggest improvements
from a year ago. Citigroup's worst stress capital ratio was 2.4
percentage points better than a year earlier.
Citigroup entered this year's test with 1 percentage point
more capital than a year earlier and its projected portfolio
loss rate fell.
After last year's embarrassing failure, Pandit and other
company officials vowed to talk more with the Fed about how it
would be scored this year, particularly for potential losses on
emerging markets assets, which are less well-known by
New CEO Mike Corbat said in January that the company was
determined to win approval for its new capital plan and would be
modest in this year's request to spend capital.
Citigroup, the third-biggest U.S. bank by assets, received
multiple bailouts from the government during the financial