U.S. banking giants JPMorgan, Bank of America, Citigroup, and others raise third-quarter dividends after passing Federal Reserve’s stress tests, ensuring sufficient capital resilience.
Bollywood Fever: U.S. banking giants revealed plans on Friday to raise their third-quarter dividends after successfully demonstrating their ability to withstand severe economic and market turmoil in the Federal Reserve’s annual stress tests.
JPMorgan Chase, the largest U.S. lender, announced a dividend increase to $1.25 per share from $1.15, as per a regulatory filing. Additionally, JPMorgan’s board authorized $30 billion in new share buybacks, effective July 1.
Bank of America will boost its dividend to 26 cents per share from 24 cents, while Citigroup will raise its dividend to 56 cents from 53 cents, according to separate filings.
“Banks are going to remain conservative on capital as uncertainty over the Basel proposal remains,” commented Brian Mulberry, a client portfolio manager at Zacks Investment Management, following the dividend announcements. Banks have expressed concerns that higher capital requirements proposed under the draft Basel endgame rules could limit their lending capabilities and harm the economy.
Morgan Stanley increased its dividend to 92.5 cents per share from 85 cents, as indicated in a filing.
The announcements were made after the banks cleared the Federal Reserve’s stress tests earlier this week. These tests determine the amount of capital banks must hold before returning money to shareholders.
Goldman Sachs announced an increase in its dividend to $3 per share from $2.75. The performance on these stress tests dictates the size of a bank’s stress capital buffer (SCB), an additional capital cushion required by the Fed to help banks weather a hypothetical economic downturn. Goldman Sachs intends to engage with its regulator to understand the reasons behind the increase in its 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,” said CEO David Solomon in a statement.
Wells Fargo also announced a dividend increase to 40 cents per share.
This year, the stress tests included 31 major banks, up from 23 last year. The tests demonstrated that the banks have sufficient capital to continue lending even in scenarios involving significant spikes in unemployment, severe market volatility, and sharp declines in residential and commercial mortgage markets.
These dividend increases reflect the confidence of U.S. banks in their capital strength and resilience amidst ongoing regulatory challenges and economic uncertainties.
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