) announced the redemption of trust preferred securities (TruPS)
worth $2 billion. The securities to be fully redeemed include
6.000% TruPS issued by Citigroup Capital IX, 6.000% TruPS issued
by Citigroup Capital XI and 6.35% enhanced TruPS issued by
Citigroup Capital XVII.
Citigroup stated that these preferred securities will be redeemed
at $25.00 plus certain amount per redeemed TruPS as accumulated
and unpaid distributions until the redemption date arrives. The
redemption is scheduled to take place on Apr 28, 2014.
The redemption depicts Citigroup's efforts toward increasing the
efficiency of its funding and capital structure under Basel III.
Notably, in 2013, the company redeemed $12 billion of senior
debt, subordinated debt, preferred and trust preferred
The planned TruPS redemptions will not affect Citigroup's Tier 1
common capital and related estimated Tier 1 common ratio under
Basel III. Further, Citigroup's Basel III Tier 1 capital and
related Tier 1 capital ratio will be unaffected, under fully
implemented Basel III rules.
TruPS redemption is viewed as a positive step for the banks,
enabling them to bring down interest expenses, as these
securities demand higher rates than other securities and often
the banks replace TruPS with equity or other low-cost debt.
Further, according to the Dodd-Frank Act, banks are no longer
allowed to consider these securities as regulatory capital
Currently, Citigroup carries a Zacks Rank #3 (Hold). Some
better-ranked major regional banks worth considering include
Wells Fargo & Company
Fifth Third Bancorp
). All 3 carry a Zacks Rank #1 (Strong Buy).
BANKUNITED INC (BKU): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
FIFTH THIRD BK (FITB): Free Stock Analysis
WELLS FARGO-NEW (WFC): Free Stock Analysis
To read this article on Zacks.com click here.