In a step to boost equity, Citicorp plans to sell common stock to shareholders next month at a discount.
The company's 70,000 shareholders will be able to buy shares at a 2.5% discount from the trading price, which was $20.25 at Tuesday's close.
The program, which Citicorp believes will raise "substantial" equity over the next 12 months, could help build the bank's Tier 1 capital ratio.
The bank reported a second-quarter Tier 1 ratio of 4.25%, up 19 basis points from the first quarter.
"It is not a bad way to pick up additional capital," said Ronald D. Reading, managing vice president at First Manhattan Consulting Group. "It is a well-trod path."
Chase Manhattan Corp. First Interstate Bancorp, and other banks have raised capital through dividend reinvestment programs.
Citicorp, however, suspended dividends on common stock in the fourth quarter of 1991, and it is structuring its program differently to allow stockholders to purchase additional shares for cash.
Under the plan, the shareholders would deposit money to buy the stock early in August, and the sale would take place at mid-month.
Shareholders would be able to purchase as little as $100 worth of shares or as much as $25,000.
Under some circumstances, Citicorp will allow an even bigger purchase. Since the buyers do not have to pay a brokerage fee, savings are greater than just the discount to the trading price.
Citicorp has been building capital through diverse methods since January 1991.
It has raised $1.4 billion through thee issues of preferred stock. An offer to exchange common for preferred shares cut dividend costs and left Citicorp room under regulatory capital rules to issue additional preferred shares.
Asset and securities sales have added about $2.8 billion to Tier 1 capital.Taking StepsSome Citicorp methods torebuild capital EquityTactic raisedAsset sales $1,600Past 18 months millionProposed shareholderstock option N.A.August '92Preferredstock issued $150March '92 millionPreferred stock $660March '91 millionPreferred stock $590February '91 million Source: Citicorp, Securities Data Co.