Jamie Dimon, CEO of JP Morgan Chase, during an interview with Jim Cramer, February 23, 2023.
CNBC
Major American banks, incl JPMorgan Chase, Wells Fargo AND Morgan Stanley said on Friday it plans to lift quarterly dividends after settling for the Federal Reserve’s annual stress test.
JPMorgan plans to increase the payout to $1.05 a share from $1 a share starting within the third quarter, subject to board approval, the Latest York-based bank said in an announcement.
“The outcomes of the 2023 Federal Reserve stress tests show that banks are resilient – even once they withstand severe shocks – and proceed to function a pillar of strength for the economic system and the broader economy,” JPMorgan CEO Jamie Dimon said in a release. “The dividend increase intended by the management board means a sustainable and moderately higher level of capital distribution for our shareholders.”
On Wednesday, the Fed published results from the annual exercise and said that each one 23 participating banks had overcome the regulatory hurdle. The test determines how much capital banks can return to shareholders through share buybacks and dividends. On this 12 months’s exam, banks suffered a “major global recession” which saw unemployment soar to 10%, business real estate values fell by 40% and housing prices fell by 38%.
After passing the test, Wells Fargo said it might increase its dividend to 35 cents a share from 30 cents a share, and Morgan Stanley said it might increase its payout to 85 cents a share from 77.5 cents a share.
Goldman Sachs announced the most important per-share gain amongst major banks, raising its dividend to $2.75 per share from $2.50 per share.
Small Citi
Meanwhile, Citigroup said it might increase its quarterly payout to 53 cents a share from 51 cents a share, the smallest increase amongst similar firms.
This is probably going because while JPMorgan and Goldman surprised analysts this week with better-than-expected results that allowed for tighter capital buffers, Citigroup was among the many banks that saw their buffers rise after the stress test.
“While we’d clearly prefer to not see an increase in our stress capital buffer, these results proceed to show Citi’s financial resilience in all economic environments,” said Citigroup’s CEO Jane Fraser said in an announcement from her company.
All major banks kept away from announcing specific plans to increase share purchases. For instance, JPMorgan and Morgan Stanley said they may buy back shares using previously announced buyout plans; Wells Fargo said it had “the power to repurchase common stock” inside the subsequent 12 months.
Analysts say banks are more likely to be more conservative of their capital return plans this 12 months. That is since the finalization of international banking regulation is anticipated to increase the extent of capital that major global firms like JPMorgan might want to hold.
There are other explanation why banks should hold capital: regional banks might also be subject to higher standards as a part of regulators’ response to the Silicon Valley Bank collapse in March, and a possible recession could increase future credit losses for the industry.