Citigroup resumes dividend, plans reverse stock split

Citigroup Inc, one of the worst-hit banks during the financial crisis, is taking more steps to get back in the good graces of shareholders.

The bank will reinstate a quarterly dividend, albeit just a penny per share, and reduce the amount of shares it has outstanding.

This second manoeuvre, called a "reverse stock split", will lift the company's stock price and allow more institutional investors to own it.

Many large investors like pension funds and mutual funds are barred from owning stocks that trade below US$5, which has been the case with Citi since early 2009.

Under Citi's plan announced Monday, every 10 shares of its stock will be exchanged for one new share as of May 6.

That will lift the price of each share of Citi stock by 10 times. Since there will be 10 times fewer shares outstanding, the overall value of the company will remain the same.

The amount of Citi shares outstanding will drop to 2.9 billion from 29 billion, which will also make the dividend payout lighter on Citi's pocket.

Citi's stock edged down nine cents to US$4.41 in midday trading.

At that rate, each new share of Citi stock would be worth about US$44.10 after the reverse split is completed.

Citi's stock traded just below US$50 in October 2007, a year before the financial crisis hit.

Though Citi has paid back the US$45 billion it received from the government in 2008, it cannot pay quarterly dividends of more than one cent a share until 2012 as a condition of the rescue.

To bypass that rule, it would have to obtain consents from the US Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp.

Citi's dividend had been as high as 49 cents per share before the financial crisis. It last paid a one cent a share dividend in February 2009, down from 16 cents per share in November 2008.

- AP