Citigroup Doubles Dividend After Stress Test Success
June 28 2017 - 7:15PM
Dow Jones News
By Telis Demos
Citigroup Inc. is set to pay out far more than it is expected to
earn in the coming year, a major milestone as the bank seeks to
revive its lagging stock.
That payout projection comes on the heels of the Federal Reserve
approving Citigroup's capital plan on Wednesday, making for the
third consecutive year it has gotten a green light. The bank had
failed in 2014 and 2012, significantly setting back its payback
plans.
Citigroup's current plan is to pay out $18.9 billion in
dividends and share repurchases over the four quarters starting in
July. That would equal more than 130% of the income that analysts,
surveyed by FactSet, expect it to generate over that period.
That is a big leap from the bank's 88% payout ratio coming out
of last year's Fed review. It is also beyond what several analysts
had been forecasting. Their expectations were for a payout ratio
closer to 110%, or roughly $16 billion.
The bank said Wednesday that its quarterly dividend will double
to 32 cents a share from the current 16 cents. It will also aim to
buy back as much as $15.6 billion in stock. Its current program,
which ends this quarter, is for $10.4 billion.
Chief Executive Michael Corbat has told the bank's investors
that it needs to be returning at least what it earns to credibly
prove it is reducing its giant capital cushion.
Capital return is a pillar of Mr. Corbat's efforts to move the
bank past a long period of restructuring, which included rebuilding
its stress-test planning after the 2014 failure.
Citigroup's shares have returned 81% since Mr. Corbat took over
in 2012, the lowest of the six biggest U.S. banks in that
period.
Already, the bank's stock has rebounded this year as investors
have bet on a big capital payout. Citigroup stock has returned
10.3% so far in 2017, more than any of its big rivals.
The bank's stock was up 2.3% in after-hours trading on
Wednesday, to $65.18.
The news of a better-than-expected payout will give the bank
additional momentum as it prepares for a day of public investor
presentations next month, at which it will detail growth
initiatives.
Write to Telis Demos at telis.demos@wsj.com
(END) Dow Jones Newswires
June 28, 2017 19:00 ET (23:00 GMT)
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