NEW YORK — Citicorp said Tuesday it will buy back $3 billion worth of its stock over the next two years, a move greeted with enthusiasm on Wall Street because of its size and timing.
Shares of Citicorp, the nation's largest banking company, jumped $1.625 to $58.75 in composite New York Stock Exchange trading.
New York-based Citicorp, which owns Citibank N.A., said its board approved a plan to buy back up to $3 billion in common shares or convertible preferred stock.
Based on the stock's June 19 closing price of $57.125, the repurchase will involve about 52.5 million shares of common stock, or a little more than 10% of the 518 million fully diluted shares on March 31.
Robert Albertson, analyst at Goldman, Sachs & Co., said the buyback is bigger and earlier than expected.
Albertson said it appears Citicorp is intent on delivering as expeditiously as possible on a promise to stop retaining capital as soon as it reached the 8% "Tier 1" capital ratio required by bank regulators.
The company said it decided on the buyback plan because it has exceeded its capital ratio goal, built reserves of more than $5 billion and is generating more capital than needed to fund business growth.
Albertson said the buyback "has to raise the investor profile" of Citicorp, whose stock has not performed as well as other bank stocks despite strong earnings and revenue growth.
The analyst said he set a target price of $71 per share over the next six to 12 months for Citicorp.
Frank DeSantis, analyst at Donaldson, Lufkin & Jenrette Securities Corp., said there appears to be a "changed mentality to do whatever it takes to get shareholder valuation up" at Citicorp.
DeSantis said share buybacks are now a part of the strategy of managing capital at Citicorp, and he expects the bank to buy back stock consistently in years to come.
He said Citicorp is enjoying a return on equity in excess of 20% and revenue is growing at a double-digit rate.
The company said shares purchased under the program are intended in part to offset dilution from shares of common stock issued under the corporation's stock-based employee compensation and benefit programs and in connection with conversions of convertible preferred stock.
Repurchases, including block purchases, are expected to be made from time to time in the open market or in private transactions depending on market conditions, and may be discontinued at any time, the company said.
The company said it may also sell put options on its common stock, which will require it to buy shares at a specific price, in connection with the repurchase program.