Citigroup May Pay $64 Billion in Dividends, Buybacks, Morgan Stanley Says

Citigroup Inc. (C), the third-largest U.S. bank, may distribute as much as $64 billion to shareholders through dividends and buying back shares through 2014, according to Betsy Graseck, a Morgan Stanley analyst.

The bank can afford to increase payouts as the Citi Holdings unit, used to house unwanted assets, shrinks faster than expected and incurs narrower losses than previously estimated, Graseck wrote in a note to clients today, raising her recommendation on the stock to “overweight.”

Citigroup may pay dividends equal to 9 percent of its current market capitalization, she estimated. That would amount to almost $12 billion, based on the share price at yesterday’s close of trading. Stock buybacks, which may resume next year, may boost the total distribution to 49 percent of the New York- based company’s market value, she said.

Chief Executive Officer Vikram Pandit, 54, will oversee “significant capital return to shareholders,” Graseck wrote. The buybacks are “signaling a return to capital management” for the bank.

Citigroup’s stock lost 90 percent of its value in 2008 and 2009, when the bank posted $29.3 billion in subprime mortgage- related losses. The firm has since reported more than $13 billion in profits. Pandit, who scrapped the dividend in 2009, reinstated a one-cent payout this quarter and said April 18 he anticipates returning capital to shareholders in 2012.

The stock rose 1.1 percent to $4.53 in New York Stock Exchange composite trading as of 11:55 a.m. It’s down 4.2 percent so far this year.

To contact the reporters on this story: Donal Griffin in New York at Dgriffin10@bloomberg.net;

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

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