Citigroup Inc. (C) announced the redemption of its preferred securities worth about $94.3 million. The redemption includes 8.5% Series F Non-cumulative Preferred Stock and 6.5% Series T Convertible Non-cumulative Preferred Stock.
The former will be redeemed on Jun 15, 2013, whereas the latter carries a redemption date of Jun 17, 2013. Holders of Series F shares will receive a quarterly dividend of 53.125 cents on the day of redemption. Further, the holders of Series T shares will receive $50.0, along with $28.8889 cents in accrued and unpaid dividends from the last payment date till Jun 17, 2013.
The redemption depicts Citigroup’s efforts to make its funding and capital structure more efficient under the Basel III standards. Notably, beginning 2012, the company has paid off $22.7 billion of senior debt, subordinated debt, preferred and trust preferred securities, including the current redemption.
The planned redemptions will not affect Citigroup’s Tier 1 common capital and related Tier 1 common ratio, either under Basel I or as estimated under Basel III. However, Citigroup’s Basel I Tier 1 capital and its Basel 1 Tier 1 capital ratio are anticipated to reduce by approximately $94 million and 1 basis point, respectively.
Citigroup’s decision to redeem preferred securities comes subsequent to the Federal Reserve’s approval for the company’s planned capital actions under 2013 Comprehensive Capital Analysis and Review (CCARF).
Other banks that received clearance from the Fed to proceed with their planned capital actions include Bank of America Corporation (BAC), Wells Fargo & Company (WFC) and U.S. Bancorp (USB). The Fed’s approval of capital plans for most of the major U.S. banks indicates considerable stability in the banking system. Moreover, for banks, this development will help boost shareholders' confidence.
Citigroup currently carries a Zacks Rank #3 (Hold).
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