This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Citigroup Primed for Capital Return in 2013

Stocks in this article: C JPM

NEW YORK ( TheStreet) -- Citigroup (C) is sitting on $63 billion in excess capital and is well positioned to begin returning capital to shareholders during 2013, according to Atlantic Equities analyst Richard State.

Citigroup's estimated Basel III Tier 1 common equity ratio was 7.9% as of June 30, increasing from 7.2% the previous quarter, and matching JPMorgan Chase's (JPM) estimated Basel III ratio at the end of the second quarter. Before JPMorgan suspended its share repurchase program in May, after disclosing large hedge trading losses , the company had been approved by the Federal Reserve to buy back $12 billion worth of shares during 2012, with another $3 billion in buybacks authorized for 2013.

Citigroup continues to follow Vikram Pandit's "good bank/bad bank" strategy to reduce its balance sheet by allowing noncore assets to runoff within Citi Holdings, while focusing on growing revenues from main subsidiary Citicorp. With Citigroup on Monday disclosing that Citicorp had $930 billion in risk-weighted assets under Basel III -- while Citi Holdings had $323 billion in RWA -- Staite said that "thus arguably Citicorp only needs $88bn of capital to operate assuming a 9.5% ratio" of Tier 1 common equity to risk-weighted assets, under Basel III.

Staite said that "given that Citigroup has $151bn of tangible common equity but only needs $88bn to run Citicorp it shows that there is a further $63bn that is currently trapped within Citi Holdings and the deferred tax assets, or DTA."

"This is capital that should be available to be returned to shareholders at some point assuming the group can utilize the DTA and that the $10bn of loan loss reserves within Holdings is sufficient to cover losses," the analyst said.

The Federal Reserve in March rejected Citigroup's initial plan to return capital to investors this year through a dividend increase and/or share buybacks.

During the company's second-quarter conference call on Monday, Pandit said that the company's "priority right now is earnings generation," which has the company expecting its Basel III Tier 1 common equity ratio "to be above 8% and maybe more by year-end." The CEO added that "we are committed to creating returns for you and returning capital," but that the timing of the return of capital "is a decision that's made by us with the regulators."

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,959.44 +154.64 0.87%
S&P 500 2,078.54 +7.89 0.38%
NASDAQ 4,781.4240 +16.0440 0.34%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs