Citigroup Inc. is set to pay out far more than it is expected to earn in the coming year, a major milestone as the bank seeks to revive its lagging stock.
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That payout projection comes on the heels of the Federal Reserve approving Citigroup's capital plan on Wednesday, making for the third consecutive year it has gotten a green light. The bank had failed in 2014 and 2012, significantly setting back its payback plans.
Citigroup's current plan is to pay out $18.9 billion in dividends and share repurchases over the four quarters starting in July. That would equal more than 130% of the income that analysts, surveyed by FactSet, expect it to generate over that period.
That is a big leap from the bank's 88% payout ratio coming out of last year's Fed review. It is also beyond what several analysts had been forecasting. Their expectations were for a payout ratio closer to 110%, or roughly $16 billion.
The bank said Wednesday that its quarterly dividend will double to 32 cents a share from the current 16 cents. It will also aim to buy back as much as $15.6 billion in stock. Its current program, which ends this quarter, is for $10.4 billion.
Chief Executive Michael Corbat has told the bank's investors that it needs to be returning at least what it earns to credibly prove it is reducing its giant capital cushion.
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Capital return is a pillar of Mr. Corbat's efforts to move the bank past a long period of restructuring, which included rebuilding its stress-test planning after the 2014 failure.
Citigroup's shares have returned 81% since Mr. Corbat took over in 2012, the lowest of the six biggest U.S. banks in that period.
Already, the bank's stock has rebounded this year as investors have bet on a big capital payout. Citigroup stock has returned 10.3% so far in 2017, more than any of its big rivals.
The bank's stock was up 2.3% in after-hours trading on Wednesday, to $65.18.
The news of a better-than-expected payout will give the bank additional momentum as it prepares for a day of public investor presentations next month, at which it will detail growth initiatives.
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(END) Dow Jones Newswires
June 28, 2017 19:00 ET (23:00 GMT)