U.S. banks to pay an additional $ 2 billion in quarterly dividends

America’s largest banks on Monday announced plans to pay investors an additional $ 2 billion in dividends next quarter after the Federal Reserve eased restrictions on shareholder payments imposed during the Covid-19 pandemic.

The move underscored the confidence of major US lenders, who believe they can return more capital to shareholders while remaining comfortably above the levels prescribed by the Fed.

The Fed released the results of its “stress tests” for lenders last Thursday, which prompted the US central bank to ease restrictions on dividends and redemptions.

Morgan Stanley has announced that it will double its quarterly dividend to 70 cents per share and increase the size of its share buyback program from $ 10 billion to $ 12 billion.

James Gorman, managing director, said Morgan Stanley had “built up significant excess capital over the past few years and now has one of the largest capital buffers in the industry.”

Other big banks have also announced higher payouts to shareholders, but only a handful have followed Morgan Stanley in increasing the size of their buyback programs.

Goldman Sachs increased its dividend from $ 1.25 to $ 2, JPMorgan Chase increased its payout from 90 cents to $ 1, and Bank of America increased its dividend from 18 cents to 21 cents.

Wells Fargo doubled its dividend to 20 cents, although the bank cut the dividend a year ago by 51 cents. Similar to Morgan Stanley, the bank said it also plans to spend around $ 18 billion during the year starting in the third quarter to buy back its own shares.

For the 13 banks that informed investors on Monday, the increase in dividends will translate to shareholders receiving an additional $ 2.08 billion in the third quarter, according to Financial Times calculations based on the companies’ most recent tally. .

Buying back their own shares is costing banks more than it would have been when the Fed imposed the pandemic restrictions, as their shares became more expensive. Stock prices have rebounded since September, in some cases peaking, on the back of a boom in trading and trading activity as well as an improving outlook for the US economy.

Many banks had already announced major share buyback programs since the last round of stress tests in December, including JPMorgan, which signed a $ 30 billion one, and Bank of America, which approved $ 25 billion. of dollars.

By analyst consensus, Morgan Stanley and Goldman were the most ahead of expectations with their scheduled payments, Barclays wrote in a note.

Morgan Stanley shares gained 2.5% in after-hours New York trading and Goldman rose 0.6%, while other major bank stocks were flat. Wells stock was down 0.7%.

Jamie Dimon, Managing Director of JPMorgan, said: “Our long-standing capital hierarchy remains the same: invest and grow our market-leading businesses. . . pay a sustainable dividend and return any remaining excess capital to shareholders. “

David Solomon, Managing Director of Goldman Sachs, said: “We are encouraged by the progress made in reducing the capital intensity of our business, as evidenced by recent stress test results. “

The Fed’s analysis last week concluded that the 23 banks included in the exercise could suffer nearly $ 500 billion in combined losses while comfortably meeting capital requirements.

Additional reporting by Colby Smith in New York

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