Daily Management Review

Leading US Banks Increase Dividends Following A Flawless Fed Stress Test


Leading US Banks Increase Dividends Following A Flawless Fed Stress Test
In the Federal Reserve's annual health check, American banking titans demonstrated that they had sufficient capital to survive significant market and economic volatility by announcing intentions to increase their third-quarter payouts on Friday.
The biggest lender in the United States, JPMorgan Chase, increased its dividend from $1.15 per share to $1.25 per share, per a filing. Additionally, as of July 1, its board approved $30 billion in fresh share buybacks.
According to separate regulatory filings from the lenders, Bank of America's dividend will grow to 26 cents per share from 24 cents, while Citigroup's will jump to 56 cents from 53 cents.
After the dividend announcement, Zacks Investment Management's client portfolio manager, Brian Mulberry, stated that banks will remain capital-conservative as long as the Basel plan remains unresolved.
Higher capital requirements outlined in draft regulations dubbed the Basel endgame, according to banks, might make it more difficult for them to lend money and could be bad for the economy.
According to a filing, Morgan Stanley increased its dividend from 85 cents per share to 92.5 cents.
The statements followed the banks' successful passing of the Federal Reserve's stress test earlier this week, which establishes the minimum amount of capital they must set aside in order to pay out dividends to shareholders.
The dividend for Goldman Sachs will increase to $3 per share from its previous amount of $2.75.
The size of a bank's stress capital buffer (SCB), an additional capital cushion that the Fed mandates banks maintain to weather a hypothetical economic downturn, is determined by how well the firm does on the stress tests.
In order to learn more about the reasons for the SCB hike, Goldman stated it will speak with its regulator.
"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," David Solomon, our CEO, said in a statement.
The dividend of Wells Fargo will increase to 40 cents.
Compared to 23 major banks assessed last year, 31 institutions were tested this year. The tests demonstrated that even in the event of a significant increase in unemployment, extreme market volatility, or sharp declines in the residential and commercial mortgage markets, banks would have sufficient capital to continue lending.