Citigroup's (C) TARP Repayment Will Be 5-15% Dilutive - Analyst

It has been widely reported that Citigroup (NYSE: C) is on the verge of announcing some type of deal to payback their $20 billion in TARP, although details remain murky.

Analysts at Deutsche Bank are commenting of a possible equity raise, saying they estimate 5-15% EPS dilution longer term from repaying TARP.

The firm said, "In the near term, the net impact is positive to EPS given the benefit of TARP dividends going away is more meaningful than an increase in shares (as earnings are currently so low). Recall that repaying TARP adds about $1b to net income annually ($20b at 8% pre-tax). Longer term, we find the net impact may be 5-15% dilutive on normal EPS of $0.65."

The firm highlighted several scenarios, with the amount of capital that needs to be raised to repay TARP ranging from $10b to $25b and the price at which it gets done ranging from $3.25-4.00. They said, "If we assume $10b of capital is issued at $3.75, we find 4% dilution. If we assume $20b of capital is issued at $3.50 we find 14% dilution."

The firm maintains their Buy rating and $5.50 price target.

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