Wall Street Banks Increase Shareholder Payments After Fed Green Light
June 28 (Reuters) – Morgan Stanley, JPMorgan, Bank of America, Goldman Sachs and Wells Fargo said on Monday that they were increasing their lump-sum payments after the U.S. Federal Reserve gave them a good health check following their annual “stress tests” last week.
Analysts and investors expected the nation’s largest lenders to start issuing up to $ 130 billion in dividends and share buybacks starting next month after the Fed ended last week to the emergency pandemic-era restrictions on the amount of capital they could give back to investors.
Morgan Stanley (MS.N) delivered the biggest surprise to investors, however, saying it would double its dividend to 70 cents per share in the third quarter of 2021. Some analysts were expecting an increase of around 50 cents.
The Wall Street giant also said it would increase share buyback spending. Its shares rose 3.7% in aftermarket trading after the announcement.
Morgan Stanley CEO James Gorman said in the announcement that the bank could return so much capital due to the surplus it has accumulated over several years. The action, he said, “reflects a decision to reset our capital base in line with the needs we have for our transformed business model.”
Bank of America Corp (BAC.N) has said it will increase its dividend by 17% to 21 cents per share from the third quarter of 2021, and JPMorgan Chase & Co (JPM.N) has said it will move to $ 1.00 per share starting at 90 cents for the third quarter.
Goldman Sachs Group (GS.N) said it plans to increase its common stock dividend from $ 1.25 to $ 2 per share.
Wells Fargo & Co (WFC.N), which has built capital faster than its competitors in part due to a Fed cap on its balance sheet, has announced plans to repurchase $ 18 billion in shares at during the four terms starting in September.
The buyback target amounts to nearly 10% of its market value and is in line with analysts’ expectations.
Wells Fargo, which has been trying for years to overcome a string of costly sell-outs scandals, said it was doubling its quarterly dividend to 20 cents per share, in line with analysts’ expectations.
“Since the onset of the COVID-19 pandemic, we have strengthened our financial strength… while continuing to address our legacy issues,” CEO Charlie Scharf said in a statement.
“We will continue to do this as we return a significant amount of capital to our shareholders,” Scharf added.
Citigroup (CN), meanwhile, confirmed analysts’ estimates that a key part of its required capital ratios had risen according to stress test results to 3.0% from 2.5%.
A hike of this magnitude will limit Citigroup’s share buybacks relative to its peers, according to a report by JPMorgan analyst Vivek Juneja. Juneja expects Citigroup to have the lowest return on capital of the major banks it covers.
Citigroup CEO Jane Fraser said the bank would continue with its “planned capital actions, including ordinary dividends of at least $ 0.51 per share” and share buybacks in the market.
Shares of Bank of America were flat after trading hours, Goldman Sachs shares rose 0.6%, while Citigroup and JPMorgan shares were down 0.9% and 0.3% respectively.
The Fed said Thursday it was ending its remaining restrictions on dividend payments after finding that the country’s largest banks would remain well capitalized in its latest stress tests.
The central bank said the test found 23 of the largest companies would suffer combined losses of $ 474 billion in a hypothetical severe recession, but still have more than twice as much capital required under Fed rules. .
Report by Niket Nishant in Bangalore; Editing by Sriraj Kalluvila
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