LONDON (SHARECAST) - Citigroup has requested the Federal Reserve's permission to buy back stock after the monetary authority's report showed that the third largest US bank had passed the third round of stress tests.
The Fed rejected the financial institution's request last year, but its recent report showed that the bank managed to reach a tier-1 capital level of 8.3% compared to the 5% minimum requirement. Consequently, Citigroup is now looking to buy back $1.2bn of its stock to, in the words of the bank, “offset estimated dilution created by annual incentive compensation grants”.
The Fed revealed yesterday that 17 of the 18 US banks undergoing the third round of stress tests had passed the 5% tier-1 capital ratio minimum and Citigroup placed third. The only entity to fail the requirement was Ally Financial.
“The nation's largest bank holding companies have continued to improve their ability to withstand an extremely adverse hypothetical economic scenario and are collectively in a much stronger capital position than before the financial crisis,” the Fed report said.
Citigroup was the only bank to make its pay-out request public although Morgan Stanley announced in January that it was requesting permission to move ahead with the full acquisition of its brokerage joint venture. Citigroup owns a 35% share in the firm.