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Citi’s extra dividend caught in the Stress test snarl up | Banking Insight

Citi failed the Comprehensive Capital Review (CCAR) undertaken by the Fed by a whisker, reportedly coming in at 4.9% on the Dec 2013 Capital instead of the 5% figure having gone overboard in trying to fit in extra dividend payouts and a large buyback program in its first submission. both

Citigroup

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Suntrust and Citi will try again with the Fed later this year. Citi  had more than $11 bln in profits for 2011 on $66 bln in revenues(after provisions) . Its $1.69 tln Balance sheet is supported by $179 bln in equity, $177 bln of it common equity. Nearly half of the banks revenues come from Retail Banking and Bad Bank holdings are down to $225 bln, a quarter of what it had in 2008, of which $109 bln are domestic US mortgages.

A Tier I common Capital started at $115 bln in the computation but was reduced by payouts to Trsry shares ( buybacks) and Dividends of $700 mln at the extra $0.25 cents it added.

A $100 bln cutoff under stress conditions would have been enough to hold balance sheet assets of $2 Tln for the stress test and a $80 bln enough for a $1.6 Tln. Metlife was disqualified for being short on Total Risk based Capital while Citigroup failed in having only$79.2 bln in the second case for $1.6 Tln of assets, which woudld have been covered by a buyback program of $1.5-$2 bln instead of $3 bln it submitted in its first application for 2012. Looks like the dudes copped out on this one!

As Citi explains in its blogs and an open letter to employees, they submitted the application with a 5.9% outcome for stress scenarios instead of 6% so when the dividend and buybacks were debited from the Capital, they were on the wrong side of 5

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