JPMorgan Chase & Co., Wells Fargo & Co., Morgan Stanley and Goldman Sachs Group Inc. led US banks in announcing higher dividends after every lender subject to this year’s Federal Reserve stress tests passed the exam.
(Bloomberg) — JPMorgan Chase & Co., Wells Fargo & Co., Morgan Stanley and Goldman Sachs Group Inc. led US banks in announcing higher dividends after every lender subject to this year’s Federal Reserve stress tests passed the exam.
The banking giants announced the increases after the close of trading Friday, as regulators freed the industry to update shareholders on payouts following this year’s exams. Even Citigroup Inc., which faces a higher capital requirement because of its test results, boosted its quarterly dividend by two cents.
The findings posted by the Fed on Wednesday showed all 23 big US lenders examined can withstand a severe global recession and turmoil in real estate markets. In typical years, clearing the exam sets the stage for banks to return billions of dollars to investors through dividends and buying back stock.
Still, banks are expecting a bevy of additional regulatory scrutiny in the months ahead — from the unveiling of the long-awaited Basel III rules to an an overhaul of the Fed’s supervision efforts in the aftermath of the collapse of four regional banks this year. That’s left most banks warning investors that, beyond bumping up dividends, they may hold off on committing to big share buybacks until they get more clarity on what’s to come.
Shares of JPMorgan and Wells Fargo rose this week after both firms showed an improved resiliency in this year’s test. The criteria for the exam were announced before March’s regional bank turmoil, so it didn’t test banks on the kind of fallout from rising rates that shook midsize lenders just months ago.
Meanwhile, results at some other firms were less resilient, with Capital One Financial Corp. also saying it will have to meet a higher capital requirement.
Citigroup was prompted to accrue capital for a more stringent requirement after last year’s stress tests. Then it said it had to continue to pause share repurchases while weighing a divestiture of its Mexican retail banking unit. The company restarted buybacks in this year’s second quarter as it shifted plans to take the unit public instead.
Unlike most of its major rivals, Citigroup will face a higher stress capital buffer in the coming quarters, the firm said Friday.
“While we would have clearly preferred not to see an increase in our stress capital buffer, these results still demonstrate Citi’s financial resilience,” Citigroup Chief Executive Officer Jane Fraser said in the statement. “We repurchased $1 billon of common stock during the second quarter, intend to increase our dividend and we will continue to evaluate capital actions on a quarter-by-quarter basis.”
For JPMorgan, the results marked a reversal from a year ago. The firm suspended share buybacks for the second half of 2022 to build capital after its required CET1 ratio jumped to 12% from 11.2%. Chief Financial Officer Jeremy Barnum said at the time that the stress capital buffer came in “even higher than expected.”
“We remain prepared for a broad range of potential outcomes, including potentially higher future capital requirements from the finalization of the Basel III capital rules,” JPMorgan CEO Jamie Dimon said in a statement Friday.
(Updates to add Citigroup from second paragraph.)
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