Jamie Dimon, CEO, JP Morgan Chase during interview with Jim Cramer, February 23, 2023.
CNBC
Major US banks, including JPMorgan Chase, Wells Fargo And MorganStanley said on Friday that they plan to increase their quarterly dividends after passing the Federal Reserve’s annual stress test.
JPMorgan plans to increase its payout from $1 per share to $1.05 per share starting in the third quarter, subject to board approval, the New York-based bank said in a statement.
“The results of the Federal Reserve’s 2023 stress test demonstrate that banks are resilient — while able to withstand severe shocks — and continue to serve as a pillar of the strength of the financial system and broader economy,” said Jamie Dimon, CEO of JPMorgan, in the press release. “The dividend increase intended by the Management Board represents a sustainable and slightly higher capital distribution to our shareholders.”
On Wednesday, the Fed released the results of its annual exercise and said all 23 participating banks cleared the regulatory hurdle. The test determines how much capital banks can return to shareholders through buybacks and dividends. In this year’s review, banks endured a “severe global recession” with unemployment rising to 10%, commercial property values falling 40% and house prices falling 38%.
After passing the test, Wells Fargo said it would increase its dividend to 35 cents a share from 30 cents a share, and Morgan Stanley said it would increase its payout to 85 cents a share from 77.5 cents a share become.
Goldman Sachs announced the largest per-share increase among major banks, raising its dividend to $2.75 per share from $2.50 per share.
Small city
Meanwhile, Citigroup announced that it would increase its quarterly payout to 53 cents per share from 51 cents per share, the smallest increase among its peers.
That’s likely because JPMorgan and Goldman surprised analysts this week with better-than-expected results that allowed for smaller capital buffers, but Citigroup was among the banks whose buffers were increased following the stress test.
“While we would clearly have preferred not to see our stressed capital buffer increase, these results nonetheless demonstrate Citi’s financial resilience in all economic environments,” said Jane Fraser, Citigroup CEO, in her company’s press release.
All major banks held back from announcing concrete plans to expand share buybacks. For example, JPMorgan and Morgan Stanley each said they could buy back shares through previously announced buyback plans; Wells Fargo said it has the “ability to repurchase common stock over the next year.”
Analysts believe banks are likely to be more conservative in their return-on-capital plans this year. The reason for this is that as international banking regulations are passed, it is expected to increase the level of capital that the largest global companies like JPMorgan would need to hold.
There are other reasons for banks to hold on to capital: Regional banks could also be bound to higher standards in a regulator’s response to the Silicon Valley bank collapse in March, and a possible recession could inflate future loan losses for the industry.
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