Magazine article American Banker

Citigroup Outflanks Peers in Fed's Stress Test

Magazine article American Banker

Citigroup Outflanks Peers in Fed's Stress Test

Article excerpt

Byline: Matt Scully

Citigroup Chief Executive Michael Corbat will still have a job tomorrow (and probably several days after that).

The bank's capital distribution plan was approved by the Federal Reserve on Wednesday, undoubtedly to the delight of shareholders who were surprised by last year's rejection. Citigroup plans -- subject to board approval -- to increase its dividend to investors from $0.01 to $0.05 per share per quarter, and to repurchase $7.8 billion of common stock, the company said in a news release after the Fed's announcement.

Citigroup scored higher than 13 other banks, including all of its large bank peers, highlighting just how far the bank has come since the crisis when it accepted more than $45 billion in taxpayer money to stay afloat.

Citi's approval indicates "only" that the central bank does not see any objectionable practices or widespread deficiencies that needed immediate attention, a senior Fed official told reporters Wednesday, speaking on the condition of anonymity. All of the large and most complex banks, including Citi, still have more work to do, the official said.

Though Wall Street firms reduced total payrolls by another 4% in 2014, big banks have staffed up to ensure they pass muster in this two-part exam that equity investors and regulators consider all-important.

Citigroup has hired 10,000 regulatory and compliance professionals, despite eliminating more than 20,000 positions in two years.

"We want Citi to be an indisputably safe and sound institution and will do everything in our power to make that the case, year in and year out," Corbat said in the release.

Citigroup's global footprint, which it touts as an earnings strength, was last year ironically a source of weakness, regulators said when announcing the 2014 results. Specific areas of concern last year included Citi's inability, according to the Fed, to project revenue and losses under a stressful scenario and its inability to develop scenarios for its internal stress testing adequately. …

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