The following article, originally published at 11:26 a.m. on Monday, Nov. 21, 2016, has been updated with analysts' comments and market data.
Citigroup (C) is boosting its stock buybacks 20% as CEO Michael Corbat works to drive higher returns while reshaping the lender after a financial-crisis bailout.
The New York bank received Federal Reserve approval to boost repurchases through June 30 by $1.75 billion, building on an $8.6 billion plan announced over the summer, the New York bank said in a statement. Coupled with a move to triple the company's quarterly dividend to 16 cents a share, the increase brings planned capital returns to $12.2 billion.
While additional buybacks will boost per-share earnings, "the more favorable development is that the Fed's approval for the increased capital return is a sign of confidence in Citigroup's ability to meet the Fed's high risk and government standards," Brian Kleinhanzl, an analyst with brokerage Keefe, Bruyette & Woods, said in a note to clients Tuesday. That's a turnaround from two years ago, when Citi failed the regulator's yearly stress test because of shortcomings in its capital-planning process, he said.
Citigroup has been paring high-risk and illiquid assets since taking a $45 billion government while working to boost both revenue and return on tangible equity, a key profitability measure on which it lags rivals like Wells Fargo (WFC) and JPMorgan Chase (JPM) . The firm beat analysts' profit estimates last quarter, due to a surge in bond trading.
"We continue to make strong progress on the factors that will allow us to deliver the returns our shareholders expect and deserve: generating consistent earnings, investing in businesses well-positioned to drive growth and continuing to strengthen our capital planning process," Corbat said in a statement. "This solid foundation will enable to us to deliver more of the capital we generate from earnings" and asset sales to shareholders, he added.
Citigroup, which paid a dividend of $5.40 a share in 2007, was forced to eliminate the payout after the financial crisis, reinstating it at just a penny a share in 2011, according to data compiled by Bloomberg.
"We're focused on improving our returns, returns on assets and specifically returns on tangible common equity," CFO John Gerspach said during a mid-October earnings call. "Maybe we've had to reapportion capital from something that produces lower returns," he added, "but we think that's the right way to manage resources."
Citigroup rose 0.1% to $55.61 on Tuesday, bringing its year-to-date increase to 7.46%, in line with the broader S&P 500.