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Bank DTAs Could Feather Your Nest

Under CEO Vikram Pandit's "good bank/bad bank" strategy, the company has placed non-core assets that are being sold-off or wound-down within Citi Holdings.

Staite said "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 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," Staite said, adding that the "timing of the capital return is highly debatable and clearly the Fed took a cautious view early this year. "

"Nevertheless," he said, "the fact that the Basel III ratio has reached 7.9%, the same as JP Morgan bodes well for the start of a capital return in 2013."

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-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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