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Citi (C) Raises Dividend Despite Higher Stress Capital Buffer

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In contrast to peers that have seen a drop in Stress Capital Buffer (“SCB”) requirement following the Federal Reserve’s 2023 stress test,Citigroup Inc. (C - Free Report) announced that its SCB requirement increased to 4.3% from the current 4%.

With this, the bank’s preliminary standardized Common Equity Tier 1 (CET1) capital ratio regulatory requirement has also increased to 12.3% from the current 12%. The requirement will be effective from Oct 1, 2023, through Sep 30, 2024.

Notably, as of the first-quarter 2023 end, Citigroup reported a Standardized CET1 capital ratio of 13.44%. This includes a 100-basis-point management buffer and is above the new regulatory requirement.

Despite the stringent regulatory capital requirements, the wall street biggie’s board of directors approved a plan to increase the current quarterly dividend by 4% to 53 cents for third-quarter 2023. Moreover, the company repurchased shares worth $1 billion in second-quarter 2023. 

Jane Fraser, CEO of C, said, “While we would have clearly preferred not to see an increase in our stress capital buffer, these results still demonstrate Citi’s financial resilience through all economic environments, including the severely adverse scenario envisioned in the Federal Reserve’s stress test. Our robust capital and liquidity position, as well as the diversification of our funding and our business model, allow Citi to continue to be a source of strength for our clients and navigate challenging macro environments securely.”

This aside, the bank started a discussion with the Federal Reserve to understand differences in non-interest income between the Federal Reserve’s stress results and Citigroup’s Dodd-Frank Act Stress Test results.

Shares of C have gained 3.3% in the year-to-date period against the industry’s fall of 5.5%.

 

Zacks Investment Research
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C currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Other Banks With Enhanced Capital Deployment Plans

Some other large U.S. banks, including JPMorgan (JPM - Free Report) and The Goldman Sachs Group, Inc. (GS - Free Report) , said on Friday that they would return more cash to shareholders after sailing through the 2023 stress test.

JPM, the largest U.S. bank, intends to raise the quarterly dividend by 5% to $1.05 per share. This follows no change in the last year’s dividend payout.

Likewise, GS announced plans to hike the dividend from the current $2.50 per share to $2.75. Notably, the stress test determined GS’ SCB at 5.5%, resulting in a minimum CET1 ratio requirement of 13%.


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