Citigroup, Inc.’s (C) board of directors approved a $1.2 billion share buyback program in the first quarter of 2014. Additionally, the board announced an unchanged quarterly dividend of one cent per share on its common shares. This will be paid on May 24 to shareholders of record as of May 6.
These actions were part of Citi’s capital plan, which was approved by the Federal Reserve under the 2013 Comprehensive Capital Analysis and Review (CCARF). These were anticipated to mitigate the probable dilution resulting from Citi’s annual incentive compensation grants.
With the latest share repurchase announcement, Citi has come a long way since 2008, when it took $45 billion of bail-out money to survive the economic downturn. Through the latest share buyback program, the company showed that its capital position has significantly improved.
Further, it shows that Citi’s efforts to streamline its operations are now bearing fruit. Over the past few years, the company has been restructuring its business, retrenching employees, selling assets and trimming costs to improve profitability.
The share buyback announcement will bring relief to investors of the company. Citi suffered a setback last year when the Fed, after considering the company’s capital plan, stated that Citi’s Tier 1 common capital ratio would fall to 4.9%. Hence, the regulator rejected the company’s capital actions.
Citi currently carries a Zacks Rank #3 (Hold). Other better performing bank stocks include JPMorgan Chase & Co. (JPM), Fifth Third Bancorp (FITB) and State Street Corp. (STT). All these stocks carry a Zacks Rank #2 (Buy).
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