By Nupur Anand
NEW YORK (Reuters) – U.S. banking giants on Friday announced plans to raise their dividends for the third quarter after demonstrating during the Federal Reserve’s annual health check that they have sufficient capital to withstand severe economic and market turbulence.
JPMorgan Chase, the largest U.S. lender, raised its dividend to $1.25 per share from $1.15, according to a filing. 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 will rise to 56 cents from 53 cents, the lenders said in separate filings with regulators.
“Banks will remain conservative on capital as uncertainty over the Basel proposal remains,” Brian Mulberry, client portfolio manager at Zacks Investment Management, said after the dividends were announced.
Banks have argued that higher capital requirements proposed under draft rules known as the Basel endgame could hamper their ability to make loans and harm the economy.
Morgan Stanley increased its dividend from 85 cents to 92.5 cents per share, a filing shows.
The announcements came after the banks passed the Fed’s stress test earlier this week, which determines how much capital they must set aside before they can return money to shareholders.
Goldman Sachs’ dividend rises to $3 per share, up from $2.75 previously.
How well a bank performs during the stress tests determines the size of the stress capital buffer (SCB). This is an additional capital buffer that the Fed requires from banks to withstand a hypothetical economic downturn.
Goldman said it will engage with its regulator to better understand why the SCB made such a jump.
“This increase does not appear to reflect the strategic evolution of our business nor the continued progress we have made to reduce the intensity of our stressors,” CEO David Solomon said in a statement.
Wells Fargo’s dividend will increase to 40 cents.
This year, 31 major banks were tested, compared to 23 last year. The checks showed that banks would have sufficient capital to continue lending under several scenarios, including a large spike in unemployment, severe market volatility and a decline in the residential and commercial mortgage markets.
Bank New dividend Old dividend
(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
(Reporting by Nupur Anand in New York; additional reporting by Tatiana Bautzer and Saeed Azhar; Editing by Lananh Nguyen and Leslie Adler)
