Fed Hammers Citi with Buyback Rejection -- WSJ

Citigroup’s (NYSE: C) financial situation has been poor enough that the Fed continues to question whether it can accelerate returns to shareholders with larger dividends.

The WSJ reports that the Fed also rejected a plan proposed by Citi to buy back $8 billion of shares. The Fed’s opinion is  an insult as it is based on a point of view that Citi will not regain significant financial health for some time.

WSJ writes that:

The capital plan that Citigroup Inc. submitted to the Federal Reserve earlier this year included the possibility of $8 billion in stock buybacks, people familiar with the situation said.

The size of the request, which is far bigger than some analysts had expected, might have hurt Citigroup’s chances of winning Fed approval. Citigroup officials were stunned by the Fed’s rejection in March of their proposal.

No one should be surprised if the revelation hurts Citi’s shares which are up 30% during the year so far, but have sold off lately.

Douglas A. McIntyre