Nupur Anand
NEW YORK (Reuters) – U.S. banking giants announced plans to raise third-quarter dividends on Friday after proving they have enough capital to withstand major economic and market shocks in the Federal Reserve’s annual health check.
JPMorgan Chase (NYSE:), the largest US lender, increased its dividend to $1.25 per share from $1.15, according to a statement. The board also authorized $30 billion in new share repurchases, effective July 1.
Bank of America’s dividend will rise to 26 cents per share from 24 cents and Citigroup’s dividend will rise to 56 cents from 53 cents, lenders said in separate regulatory filings.
“Banks will remain conservative on capital as uncertainty remains regarding the Basel proposal,” Brian Mulberry, client portfolio manager at Zacks Investment Management, said after the dividend announcement.
Banks say higher capital requirements proposed in draft rules known as the “Basel endgame” could hamper their ability to lend and harm the economy.
Morgan Stanley increased its dividend to 92.5 cents per share from 85 cents, according to a statement.
The announcement came after banks passed the Fed’s stress test earlier this week, which determines how much capital they need to set aside before they can return money to shareholders.
Goldman Sachs’ dividend will rise to $3 per share, up from $2.75 previously.
How well a bank passes stress tests determines the size of its stress capital buffer (SCB)—an additional capital cushion the Fed requires banks to withstand a hypothetical economic downturn.
Goldman said it would work with its regulator to better understand why its SCB jumped.
“This increase does not appear to reflect the strategic evolution of our business and the ongoing progress we have made in reducing the intensity of our stress losses,” CEO David Solomon said in a statement.
Wells Fargo’s dividend will rise to 40 cents.
This year, 31 large banks were tested, compared to 23 last year. The tests showed that banks would have enough capital to continue lending in several scenarios, including a significant surge in unemployment, severe market volatility and a decline in the residential and commercial mortgage markets.
Bank New dividends Old dividends
(per share) (per share)
JPMorgan $1.25 $1.15
Bank of America 26 cents 24 cents
Citigroup 56 cents 53 cents
Wells Fargo 40 cents 35 cents
Goldman Sachs $3 $2.75
Morgan Stanley 92.5 cents 85 cents