Citigroup Inc. (C)’s Surprising Post Stress-Test Move

Having failed its stress test last year, and being the biggest bank outside of B of A still having the most trouble extricating itself from financial-crisis difficulties, Corbat wants to play things coolly and conservatively. The bank is hard at work repairing its balance sheet and has made great strides in piling on the capital already.

This move to not return money to shareholders (except for a possible, very-small share buyback) is right in line with that kind of thinking.

Foolish bottom line
Also, I’ll echo something The Motley Fool’s Financials Bureau Chief Matt Koppenheffer said on this surprise move by Citi: Corbat has been CEO for such a short time — and he sells himself as such the paragon of measured, traditional banking — that he probably feels he couldn’t be seen throwing money around will-nilly when there’s still so much work to be done repairing the bank’s balance sheet.

And in the end, I think investors ought to applaud this move. Sure, every investor wants more dividend money in his or her pocket, but at what ultimate cost? A big dividend doesn’t do anyone any good when there’s no bank left around to pay it.

Over at JPMorgan, CEO Jamie Dimon is up to something similar: After a tumultuous 2012 that saw the superbank lose $6 billion in the London Whale trading scandal, Dimon is rumored to be asking the Fed for share buybacks at only half the amount of last year’s program.

Dimon is rightly proud and rightly protective of his “fortress balance sheet.” Corbat’s thinking seems — intelligently — along those same lines. Citi investors should be happy.

The article Citigroup’s Surprising Post Stress-Test Move originally appeared on Fool.com and is written by John Grgurich.

Fool contributor John Grgurich owns shares of JPMorgan Chase. Follow John’s dispatches from the bleeding heart of capitalism on Twitter @TMFGrgurich. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo.

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