Jamie Dimon, CEO, JP Morgan Chase, in interview with Jim Cramer, February 23, 2023.
CNBC
Major US banks include JPMorgan Chase, Wells Fargo And Morgan Stanley said Friday it plans to increase its quarterly dividend after clearing by the Federal Reserve annual stress test.
The New York-based bank said in a statement JPMorgan plans to increase its dividend payout to $1.05 per share from $1 per share starting in the third quarter, subject to to the approval of the board of directors.
JPMorgan CEO Jamie Dimon said: “The results of the Federal Reserve’s 2023 stress test show that banks are resilient – even when withstanding severe shocks – and continues to serve as a pillar of strength for the financial system and the broader economy.” “The Board’s intended dividend increase represents a modestly higher and sustainable distribution of capital for our shareholders.”
On Wednesday, the Fed released result from its annual exercise and said that all 23 participating banks have overcome regulatory hurdles. The test shows how much capital a bank can return to shareholders through buybacks and dividends. During this year’s exam, banks experienced a “severe global recession” with unemployment rising 10 percent, commercial property values down 40 percent and housing prices down 38 percent.
After passing the test, Wells Fargo said it would increase its dividend from 30 cents a share to 35 cents a share, and Morgan Stanley said it would increase its dividend payout to 85 cents a share from 77 ,5 cents a share.
Goldman Sachs posted the biggest per-share gain among major banks, increasing its dividend to $2.75 a share from $2.50 a share.
Small Citi
Meanwhile, Citigroup said it would increase its quarterly payout to 53 cents a share from 51 cents a share, the smallest increase among peers.
That could be because while JPMorgan and Goldman surprised analysts this week with better-than-expected results that allowed their capital buffers to be eased, Citigroup was among the banks that saw the Their buffer increased after the stress test.
“While we clearly do not want to see an increase in our stressed capital buffer, these results still demonstrate Citi’s financial resilience in any economic environment,” said CEO. Citigroup Jane Fraser said in her company’s release.
All major banks delayed announcing specific plans to increase share buybacks. For example, JPMorgan and Morgan Stanley both said they could buy back shares using previously announced repurchase plans; Wells Fargo said it has a “common stock buyback possibility” next year.
Analysts say banks are likely to be more cautious with their payback plans this year. That’s because finalizing international banking regulations is expected to increase the level of capital that the biggest global companies like JPMorgan will need to maintain.
There are other reasons for banks to hold capital: Regional banks may also be subject to higher standards as part of regulators’ response to Silicon Valley Bank Collapse in March, and a potential Depression could increase future loan losses for the industry.
