The largest US banks said they would increase payouts to shareholders after the Federal Reserve said the banks are able to keep lending in a severe hypothetical recession.
Four of the six biggest banks boosted their dividend payments on 27 June. The collective 15% increase in payouts is relatively muted compared with last year, when the banks raised dividends by 40%. Several banks also outlined plans to buy back their own stock.
Goldman Sachs announced the largest dividend increase. It said it would increase its dividend to $2.50 a share from $2, though the firm didn’t announce a new stock buyback program. Shares rose slightly after hours.
The Fed last week said 34 of the largest banks had sufficient capital to withstand a crisis, a necessary hurdle for banks to clear to return money to shareholders. The central bank had capped dividend payouts and halted stock buybacks during the pandemic to guard against the possibility of loans going sour, but it lifted those restrictions last year after the economy rebounded.
READ It is easy to mock Goldman but banks must take time off seriously
Though the banks were able to withstand a hypothetical recession in the most recent stress test, some must hold more capital as a result. JPMorgan held its dividend at $1 per share, citing higher capital requirements in the future. Shares were little changed after hours. Citigroup, which is also facing higher capital requirements, left its dividend unchanged at 51 cents a share.
Bank executives and policymakers have grown increasingly concerned that a recession is brewing. Fears of a downturn have caused bank stocks to struggle this year after big gains in 2021. The KBW Nasdaq Bank Index is down 21% so far in 2022, lagging behind the S&P 500.
Morgan Stanley said it would increase its dividend to 77.5 cents a share, up 11% from last year’s payout of 70 cents. The bank also announced plans to buy back up to $20bn in stock. Morgan Stanley rose 1% in after-hours trading.
Bank of America boosted its dividend by a penny to 22 cents a share. The bank also said it had $17bn remaining under an existing buyback program as of the end of March.
Wells Fargo boosted its dividend to 30 cents a share, an increase of 20%. The bank also said it has “significant capacity” to buy back stock.
Write to Charley Grant at email@example.com
This article was published by Dow Jones Newswires
Leave a Comment