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Citigroup must pass 2013 Fed stress-test – C, JPM, BAC, WFC, GS & MS

Boston, MA 03/08/2013 (wallstreetpr) – America’s third largest U.S bank Citigroup Inc (NYSE:C) has sought permission from the Federal Reserve for a share buyback of $1.2 billion without an increase in dividend. A year earlier its request had been rejected. The company said that annual incentive compensation grant-related dilution would be offset by the buyback. The Federal Reserve will not be revealing whether the capital plans of America’s 18 biggest banks have been approved or not until next week. Michael Corbat, the Citigroup Inc (NYSE:C) CEO does not want to flounder in the manner Vikram Pandit, his predecessor had. The latter had been unsuccessful in convincing regulators that they would be able to survive the economic slump by boosting shareholder rewards.

CEO credibility on the line
The Citigroup Inc (NYSE:C) board members have attributed last years rejection to Pandit’s mismanaged operations. Corbat’s credibility is on the anvil and he stands to lose it if the capital plan approval does not come through said a London –based analyst. It would be an indication of the fact that he is not in sync with how Citicorp is viewed by the regulators. In a dim economic scenario, the company’s Tier 1 Common ratio which is a measure of financial strength could fall to 8.3 percent. As per the federal report, even in a highly adverse scenario amongst the country’s six biggest banks, this was the highest ratio.

Even the best must go through the test
The largest lender JPMorgan Chase & Co (NYSE:JPM) would have 6.3 percent while Bank of America Corp (NYSE:BAC) which stands in second place would have 6.8 percent. Wells Fargo & Co (NYSE:WFC) and Goldman Sachs Group, Inc (NYSE:GS) would stand at 7 percent and 5.8 percent respectively while Morgan Stanley (NYSE:MS) would have 5.7 percent. All these banks need to breeze through the annual stress tests that are meant to gauge whether the country’s largest lenders can weather another economic crisis. Citigroup Inc (NYSE:C) was the only one among the largest tested banks to reveal its buyback and dividend plans yesterday. It is critical for Citicorp to pass the stress test this year.

Shares of Citigroup Inc (NYSE:C) went up by 0.94% to close at $45.00
Shares of JPMorgan Chase & Co (NYSE:JPM) went up by 1.20% to close at $50.63
Shares of Bank of America Corp (NYSE:BAC) went up by 2.85% to close at $12.26
Shares of Wells Fargo & Co (NYSE:WFC) went up by 1.03% to close at $36.42
Shares of Goldman Sachs Group, Inc (NYSE:GS) went up by 1.62% to close at $156.62
Shares of Morgan Stanley (NYSE:MS) went up by 1.35% to close at $23.22

Published by Pushpa Naresh

Pushpa Naresh has done MBA (Finance) and an avid market tracker. She is a technical analyst who closely tracks US markets along with other global markets like India. She has been expressing her views about markets and also advises various clients.

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