No Dividend Party for Citi
The Federal Reserve last Thursday announced the results of its annual stress tests for the nation's 18 largest banks last Thursday. Now investors are looking ahead to Thursday, March 14, for the regulator to announce the results of the Comprehensive Capital Analysis and Review (CCAR) of the banks' capital plans through the first quarter of 2014. Most of the big banks and many large regional banks not subject to CCAR but subject to the Fed's Capital Plan Review (CapPR), are expected to announce dividend increases and/or stock buybacks. Citigroup ( C) fared very well in the stress tests, with the Fed saying the bank would lose $28.6 billion through the end of 2014 under the regulator's "severely adverse scenario," with a minimum Tier 1 common equity ratio of 8.3%. The tests showed Citi to have plenty of excess regulatory capital. Citi's minimum stressed capital ratio according to the Federal Reserve would be the highest among the "big four" U.S. Banks, which also include JPMorgan Chase ( JPM), Bank of America ( BAC) and Wells Fargo ( WFC). But investors will have to wait at least another year for a dividend increase. Citigroup last Thursday jumped the gun by announcing it had requested Federal Reserve approval for $1.2 billion in common share repurchases through the first quarter of 2014, while keeping its quarterly dividend at a nominal 1 cent per share. Some investors were no doubt disappointed with Citigroup's announcement, however, with such a small capital return and the continued wind-down of non-core subsidiary Citi Holdings, the company's capital can be expected to continue to accumulate. Citigroup's Basel I Tier 1 common equity ratio was 12.7% as of Dec. 31, increasing from 11.8% a year earlier.