Citigroup Inc. (NYSE: C) shares are being punished over the Federal Reserve not allowing the company to increase its stock buyback or its common stock dividend. The reality is that Citigroup’s management deserves an F for how it handled the news of the stress test. They may even deserve an F for how they prepared for the stress test.

Citigroup issued a press release on Wednesday confirming that the Fed objected to the capital plan that it submitted. What is sad here, outside of the response, is that Citigroup was only asking for a $6.4 billion common stock repurchase program and an increase of the common stock dividend to $0.05 per share.

The new dividend yield would have been five times more than it is now, but this was still only going to be a 0.4% yield prior to the reactionary stock drop. Citigroup will be permitted to continue with its current capital actions, which are a mere $1.2 billion for buybacks and a dividend of $0.01 per share per quarter.

CEO Michael Corbat should have led a conference call on Thursday. Instead, he just gave quotes in a press release saying how the bank is deeply disappointed:

We will continue to work closely with the Fed to better understand their concerns so that we can bring our capital planning process in line with their expectations and meet their standards on a qualitative basis as well. We have not yet made a decision as to when we will resubmit our plan. We clearly are being challenged to meet the highest standards in the CCAR process. Despite whatever shortcomings the Fed saw in our capital planning process, we have made tremendous progress over the past several years in enhancing our capital position and Citi remains one of the best-capitalized financial institutions in the world. We will continue to work incredibly hard to serve our clients and generate the returns our shareholders expect and deserve.

Investors who had been buying Citi shares prior to the stress tests were expecting that it would get to reinstate a higher dividend. Most banks are back close to pre-recession highs in share price and dividend rates. Not Citigroup. Its $0.01 quarterly common stock dividend is hardly even a fraction of its peak.

Citigroup’s common stock was down 5.8% Thursday, at $47.25 in a 52-week range of $41.60 to $55.28. To show just how bad Thursday’s reaction is: this stock challenged its lows of 2014 on Thursday.

Keefe Bruyette & Woods and Sanford Bernstein both downgraded Citigroup shares on Thursday. Other analysts have expressed serious disappointment, and that $59.90 consensus analyst price target is likely to come down handily in the coming days.

Vikram Pandit would have held a conference call to explain what he thought the issues were. Corbat had been well respected around the CEO transition time, but frankly this feels like he just went out to lunch and didn’t bother checking back with anyone at work.

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