One analyst says the company could easily pay out $2 billion in dividends during 2012 while buying back $4 billion in shares, and still meet the new capital requirement many years in ahead of time.
Of course, $2 billion in dividends would translate roughly to a quarterly payout of 17 cents a share, or a modest yield of 1.79% at Thursday's closing share price of $39.02.. Maybe Citi's board could be persuaded to lean more toward a higher dividend rather than support senior management's stock options through buybacks. But that's another story.
The Basel Committee agreed in late June to increase capital requirements for "global systemically important banks" beyond the 7% Tier 1 common ratio originally agreed upon, by adding an additional 1% to 2.5% in additional required capital, "depending on a bank's systemic importance," plus an additional 1% surcharge to discourage banks already facing the highest capital requirements from increasing "materially their global systemic importance."Citi will certainly need to achieve a Basel III Tier 1 common ratio of 9.5% by January 2019, and that to play it safe, the company should count on hitting the highest possible Tier 1 common equity ratio target of 10.5%. Citigroup CFO John Gerspach said on Friday that the company expected "to begin returning capital to shareholders next year and end