Source: Wall Street See
On Friday, the US banking industry announced an increase in dividend payouts, such as JPMorgan's plans to buy back $30 billion in stocks and Morgan Stanley receiving approval to buy back as much as $20 billion in stocks. Overnight on Friday, bank stocks rose across the board, with Citigroup rising 3.1% and Wells Fargo & Co. rising 3.43%.
Major US banks announced increased returns to investors after successfully passing the Federal Reserve's annual stress test this week.
31 major US banks, including JPMorgan, Bank of America, Citigroup, Wells Fargo & Co, and Morgan Stanley, all passed the Federal Reserve's annual stress test this week. The test results showed that all participating banks were able to maintain capital above the minimum requirements under a series of extreme adverse economic scenarios, such as a 10% increase in the US unemployment rate, a 55% decline in stock market value, and a 40% drop in commercial real estate prices, demonstrating strong capital strength and risk resistance capabilities.
Major US banks, after passing the Federal Reserve's annual stress test on Wednesday this week, announced increased dividends and share buyback programs on Friday, showing confidence in their capital adequacy level. This move not only reflects the confidence of the banking industry in its capital strength, but also heralds its commitment to healthy payouts in the context of the expected easing of regulatory rules under Basel III.
Wall Street banks raised their dividends, and bank stocks in the US rose across the board.
Large financial institutions such as JPMorgan and Bank of America, upon confirmation from regulatory scrutiny that they were adequately capitalized in the face of hypothetical economic downturns, led the way in announcing increases in dividends. More than six major banks, including Citigroup, Wells Fargo & Co, and Morgan Stanley, joined in the effort to increase dividends. In addition, JPMorgan and Morgan Stanley approved billions of dollars in additional share buyback programs.
The following are details of the increased quarterly dividends for each bank:
$Bank of America (BAC.US)$Dividends increased to $0.26 per share from the previous $0.24 per share;
$Citigroup (C.US)$Dividends increased to $0.56 per share from $0.53 per share;
$JPMorgan (JPM.US)$Dividends increased to $1.25 per share from $1.15 per share in the previous quarter;
$Morgan Stanley (MS.US)$Dividends increased to $0.925 per share from $0.85 per share and was authorized to repurchase up to $20 billion in common stock;
$Wells Fargo & Co (WFC.US)$Dividends increased by 14% to $0.40 per share from $0.35 per share;
JPMorgan's board of directors authorized a new, up to $30 billion share repurchase program and raised the quarterly dividend to $1.25 per share from $1.15 per share;
$Goldman Sachs (GS.US)$Planned to raise quarterly dividends from $2.75 per share to $3.00 per share;
$Bank of New York Mellon (BK.US)$Planned to raise quarterly dividends by 12% to $0.47 per share;
The Federal Reserve stated on Wednesday that it hoped banks would wait until 4:30 pm Eastern Time on Friday after the US stock market closes to announce any plans related to dividends and share buybacks in order to give the banks and investors enough time to analyze and digest the relevant information. Bank stocks in the US rose across the board overnight on Friday. JPMorgan, Bank of America, Citigroup, Wells Fargo & Co, Goldman Sachs, and Morgan Stanley all closed higher by 1.55%, 1.32%, 3.1%, 3.43%, 1.43%, and 1.49%, respectively.
This year's annual stress test, as an important measure to strengthen financial regulation after the 2008 financial crisis, covers banks with assets over $100 billion. The test results showed that the common equity Tier 1 capital ratio (as the highest quality regulatory capital) of all participating banks will remain at 9.9% under hypothetical extremely unfavorable economic scenarios, which is significantly higher than the minimum standard of 4.5% set by regulatory agencies.
This result not only demonstrates the resilience of the US banking industry in the face of potential economic pressure, but also provides further opportunities for banks to enhance shareholder value. As the banking industry demonstrates stronger capital strength and risk management capabilities, investors can expect more stable and sustainable returns.
Banks may have easily passed stress tests, but the tests themselves remain a topic of debate in academic and policy circles. Francisco Covas, Chief Research Officer of the Bank Policy Institute, argues that the models used by the Fed in stress testing exhibit excessive volatility, which could increase uncertainty around the results. Therefore, he advocates for a stricter public scrutiny of the design and implementation of stress tests to ensure their transparency and efficacy.
Editor / jayden