Citigroup Inc (NYSE:C) reported that it would be returning capital of almost $19 billion to shareholders. This decision was taken by the company after passing a stringent regulatory test, a much-awaited victory for CEO Michael Corbat and investors.
Citigroup recently reported that it intends to repurchase common stock up to $15.6 billion over the imminent year and increase its quarterly payout to 32 cents a share, bringing total dividend to $18.9 billion. The total dividend is 54% more than the Fed permitted last year and around 1.25 times the profits that market analysts project Citigroup to earn in the upcoming four quarters. Analysts had projected company would get the right to increase dividends to almost 1.12% of yearly profits.
Citigroup reported the updates after the U.S. Federal Reserve mentioned the 34 leading U.S. banks had successfully passed the second part of its yearly stress test, and would hence be able to put funds to work in distinct ways other than strengthening their balance sheets.
This year’s assessment was a particularly major rite of passage for Citigroup, whose investors have been keen to witness management purchase back shares that had been underachieving peers. Corbat said that for some time, they have retained a considerable amount of capital in surplus of what is required to prudently run and invest in the company. Now, he mentioned, the bank can start returning increased capital to its investors and enhancing Citigroup’s overall returns.
Peter Nerby of Moody’s Investors Service said that it is another successful step taken in the recovery of Citi from losses in the fiscal crisis. The bank took 3 bailouts from the government in both 2008 and 2009. The bank built surplus capital by shedding assets and via additions from net income that needed capital support. Under the leadership of Corbat, Citigroup has liquidated an assortment of ill-fitting resources and pulled out of almost 20 consumer markets.