Citigroup fails inspection again
For the second time in three years, the Fed tells the bank that it isn't up to par and can't increase its dividend or initiate share buybacks.
The results of these tests determine whether or not banks will be allowed to raise dividends or initiate share buyback programs, and this year, the only big bank to fail was Citigroup (C). This is the second time in three years that the bank has failed.
The problem this year wasn't with Citigroup's liquidity. The bank's capital ratios fell well above the required benchmark. The problem was the bank's processes in place around its ability to forecast losses across all of the markets that Citigroup operates in. These processes domestically and internationally did not reach a level that the Fed decided was adequate.
But with shares as cheap as they are today, does this black eye make Citigroup a bank to stay away from, or is now a good time to buy? On Thursday's Stock of the Day, Motley Fool analyst David Hanson says he's definitely not staying away. Despite Citigroup's troubles, it remains the cheapest of the big banks today, and still trades at a discount to its tangible book value. David sees this as a bank that will definitely be in a better place than it is today five or ten years down the road.
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The company plans to close stores and lay off employees, and says it needs to make some deeper changes.
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