US banking giants to hike dividends after passing Fed stress tests
JP Morgan Chase
A group of large US banking giants on Friday announced intentions to boost their third-quarter dividends after satisfactorily passing the Federal Reserve's yearly stress test that tests whether banks have enough capital to survive severe economic and market turmoil.
JPMorgan Chase, the largest US lender, increased its dividend to $1.25 per share from $1.15, a regulatory filing showed. The board also authorised $30 billion in new share buybacks, effective July 1.
In addition, Bank of America announced a 26-cent dividend per share from 24 cents. Citigroup matched that by boosting its dividend to 56 cents per share from 53 cents, the banks said in separate filings.
"Banks are going to remain conservative on capital as uncertainty over the Basel proposal remains," Brian Mulberry, a client portfolio manager at Zacks Investment Management, said after the dividends were announced.
Morgan Stanley declared a dividend hike to 92.5 cents a share from 85 cents. Those plans were disclosed after banks passed the Fed's stress tests, meant to determine how much capital banks must hold before they can return money to shareholders.
Goldman Sachs, on its part, vowed to lift the dividend to $3 a share from $2.75.
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Results from these stress tests dictate the size of each bank's stress capital buffer (SCB), a surcharge on capital that the Fed requires them to hold in order to weather potential economic storms.
Goldman expressed their puzzlement at the rise of their SCB.
"This increase does not seem to reflect the strategic evolution of our business and the continuous progress we’ve made to reduce our stress loss intensity," CEO David Solomon said in a statement.
Wells Fargo announced a 40-cent per share dividend hike.
This year's stress tests examined 31 large banks, versus 23 in the last one. The tests showed banks have enough capital to keep lending even if the country is struck by adverse conditions such as high unemployment, steep market volatility, and both residential and commercial mortgage markets decline.