Fed Gives Bankers More Time to Whine
Written by: Philip van Doorn
Tickers in this article: JPM C BAC WFC
In a year's time we have gone from being behind our peers to being ahead of our peers."
Citigroup (C) estimated that its June 30 Basel III Tier 1 common equity ratio under the capital rules proposed in June was 7.9%, "up from 7.2% in the first quarter," according to CFO John Gerspach, who also said during the company's earnings call that "we continue to expect to be above an 8% Basel III Tier 1 Common Ratio later this year." While the Fed in March rejected the company's plan to begin returning capital to shareholders, Citigroup may be returning a very significant amount of capital to investors over the long haul. Atlantic Equities analyst Richard Staite said in July that Citigroup had as much as $63 billion in excess capital tied up in its Citi Holdings run-off subsidiary and deferred tax assets, setting the company up for a significant capital return during 2013.
Wells Fargo (WFC) in March received Fed approval to raise its quarterly dividend to 22 cents a share from 10 cents, and for the company to execute "a higher level of common share repurchase activity in 2012 versus 2011," when it bought back 85.8 million shares. Wells Fargo bought back roughly 53 million shares during the second quarter, and entered into forward purchase agreements to buy back 11 million more shares in the third quarter. The company's estimated Basel III Tier 1 common equity ratio under the capital rules proposed in June was 7.78% as of June 30. While he couldn't provide specific figures on buyback plans, CFO Tim Sloan said during the company's earnings call that "we continue to believe our shares are undervalued, and we are going to continue to be in the market."