S&P: Citigroup improvement ahead

Citigroup Inc.'s (AA-/stable/A-1+) announcement of $15 billion of share buybacks over the next 18 months will still permit a modest but welcome improvement in balance-sheet strength. Citigroup's capital cushion has not been as high as it could be given its risk profile, some of which is not captured in regulatory capital ratios.

The buyback program will initially absorb the capital freed up by the Travelers Life & Annuity Co. (AA/Watch negative/--) sale and then be paced with the growth in retained earnings.

Standard & Poor's said it expects that should there be any adverse developments such as further litigation charges, the repurchase program will be adjusted to compensate. Capital generation will still be sufficient to fuel organic growth. Without acquisitions, which are unlikely given regulatory restrictions, retained earnings will likely outrun capital needs.

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