Federal Reserve ends special oversight of Citicorp's finances

February 16, 1994|By Bloomberg Business News

NEW YORK -- Citicorp said the Federal Reserve and the Comptroller of the Currency have ended special regulatory oversight of the nation's largest banking company, possibly paving the way for Citicorp to restore its dividend.

Citicorp said the regulators terminated a memorandum of understanding because Citicorp's financial condition is much improved from two years ago, when a mountain of bad loans forced closer supervision of the company's activities.

The New York-based company suspended its 25-cents-a-share dividend in October 1991, saving about $96.6 million in dividend payments each quarter.

"I expect that they will bring the dividend back at some point this year," said Ray Soifer, a bank analyst with Brown Bros. Harriman & Co., New York.

Citicorp's shares closed at $40.75 yesterday, unchanged, in New York Stock Exchange trading.

Citicorp's finances have improved since February 1992, when the comptroller imposed the memorandum because of the bank's billions of dollars in bad loans.

Citicorp's net income for 1993 rose to $2.2 billion, or $4.50 a share, from $722 million, or $1.35, in 1992, because of lower expenses associated with delinquent loans and assets, as well as lower amounts of foreclosed real estate.

Citicorp's total delinquent assets and foreclosed real estate fell to $8.2 billion at the end of 1993 from $10.4 billion a year earlier.

The lower delinquencies are reflected in Citicorp's provision for credit losses, which declined to $2.6 billion from $4.14 billion at the end of 1992.

To conserve capital as loan losses mounted, in October 1991 Citicorp discontinued the dividend, which already had been reduced from 44.5 cents a share in November 1990.

Citicorp disclosed the memorandum of understanding with regulators in August 1992 in an offering circular for the sale of convertible preferred stock. The memorandum specifically required Citicorp to notify federal regulators of major purchases of assets, changes in its loss reserves, and of its capital and operating plans.

"This action is not one that is related to the dividend," said Jack Morris, a Citicorp spokesman. However, "it would be timely to consider a dividend in 1994 and that certainly can be expected."

Eight of the nation's 10 largest banking companies increased their dividend rates in the last three months.

The nation's second-largest bank, BankAmerica Corp., said last week it intends to raise its dividend by 5 cents, to a record 40 cents a share.

Also posting dividend increases recently are NationsBank Corp., Chemical Banking Corp., J.P. Morgan & Co. Inc., Chase Manhattan Corp., Bankers Trust New York Corp., Banc One Corp. and First Union Corp.

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