Citigroup to Reinstate 1-Cent Dividend, Plans Reverse Split
March 21 (Bloomberg) -- Citigroup Inc., the U.S. bank that received the largest taxpayer bailout, said it would reinstate a dividend at 1 cent per share in the second quarter after a planned 1-for-10 reverse split of its common stock.
Citigroup, which hasn't paid a quarterly dividend since 2009 because of the financial crisis, will exchange 1 new share for every 10 of common stock after the close of trading on May 6, the New York-based bank said today in a statement.
"It puts some make-up on the black eye they have," said David Knutson, a credit analyst with Legal & General Investment Management, which oversees about $85 million of Citigroup bonds. "They're doing it for the same reason why people put up billboards on the sides of highway. It's advertising, it's marketing."
JPMorgan Chase & Co., Wells Fargo & Co. and Goldman Sachs Group Inc. were among six lenders that disclosed more than $16.2 billion in share buybacks and $5.4 billion of annualized dividend increases on March 18, according to data compiled by Bloomberg. The banks made their announcements after learning they passed a Federal Reserve review of their financial health.
Citigroup rose 3 cents, or 0.7 percent, to $4.53 at 10:32 a.m. in New York Stock Exchange composite trading. The shares were down 4.9 percent this year through March 18, after rising 43 percent in 2010.
'A 2012 Thing'
Chief Executive Officer Vikram Pandit said last October that the bank wouldn't return capital to shareholders until 2012. On a Jan. 18 call with analysts, he said that returning capital to shareholders, either through a dividend or a share buyback, was "a 2012 thing."
"Citi is a fundamentally different company than it was three years ago," Pandit, 54, said in today's statement. "The reverse stock split and intention to reinstate a dividend are important steps as we anticipate returning capital to shareholders starting next year."
JPMorgan, led by CEO Jamie Dimon, said last week it would increase its dividend to 25 cents a share from 5 cents and authorized a $15 billion stock repurchase. Wells Fargo, the fourth-largest U.S. bank by assets, authorized the repurchase of 200 million shares and increased its dividend to 12 cents.
The nation's biggest banks were required to submit capital plans to the central bank, some of which included requests for dividend increases.
Regulators' 'Blessing'
"It's a blessing from the regulators," said Jason Goldberg, an analyst with Barclays Plc. "From Citi's standpoint, the fact that they got to return to a dividend, while very modest, is somewhat symbolic that the handcuffs are slowly coming off."
A 1-cent quarterly dividend would produce an annualized dividend yield of 0.09 percent based on a reverse split conducted at the March 18 share price. That would be the third- lowest among Standard & Poor's 500 Index companies that pay a dividend, according to data compiled by Bloomberg.
Citigroup, which reported a profit of $10.6 billion for 2010, will pay $87 million to shareholders for the three final quarters of this year, according to Shannon Bell, a spokeswoman for the bank.
The stock will still trade under the ticker C, and no fractional shares will be issued in connection with the reverse split, the bank said.
Shares Circulating
Citigroup has almost three times as many outstanding shares as any other company in the S&P 500, according to data compiled by Bloomberg. The bank has about 29 billion shares, which will be reduced to approximately 2.9 billion by the reverse split.
At last year's annual meeting, the U.S. Treasury Department supported a reverse stock split, "which will address the fact that the company has a much larger number of shares outstanding than is necessary to ensure adequate trading liquidity," the department said at the time.
The U.S. government completed the sale last year of its 7.7 billion common shares, which it obtained after converting a preferred stake acquired through a $45 billion bailout of the bank during the financial crisis.
To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net Donal Griffin in New York at dgriffin10@bloomberg.net
To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net .
Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/Sent from my iPad
