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Goldman (GS) & Others Boost Payouts Following Stress Test
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Following the clearing of the Federal Reserve's 2024 Stress Test, the biggest U.S. banks took turns returning excess capital to shareholders through dividends and share repurchases.
Last week, the Fed reported that all 31 banks successfully weathered this year’s stress test. The test evaluates the capacity of the biggest U.S. banks to withstand a significant economic downturn. It is used to determine the most recent minimum capital requirements, which are meant to cushion possible losses.
Goldman Sachs Group Inc. (GS - Free Report) , JPMorgan Chase & Co. (JPM - Free Report) , and Bank of America Corp. (BAC - Free Report) were among those who bumped up payouts.
JPMorgan stated it was raising its quarterly dividend by 8.7% to $1.25 per share. It's the second time the company raised its quarterly dividend this year. JPM also authorized a new $30-billion share repurchase program, effective Jul 1, 2024.
Goldman Sachs's capital plan includes an increase in the common stock dividend from $2.75 to $3.00 per share. This increase is subject to approval by the firm’s board of directors at the customary third-quarter meeting.
Bank of America plans to increase its quarterly common stock dividend by 8% to 26 cents beginning in third-quarter 2024.
Citigroup Inc. (C - Free Report) , Morgan Stanley and several other large lenders also hiked their dividend payouts.
Citigroup performed better than expected in the stress test this year. The bank was the only one among its peers, which include Wells Fargo, BofA, Goldman, JPMorgan and Morgan Stanley, to exhibit lower losses in the stress test compared with the previous one.
Among the major banks, Citigroup was the only one to witness a decline in its capital ratio requirement for the upcoming year, from 12.3% to 12.1%. The company only raised its quarterly dividend payment to $0.56 per share or 6%. Morgan Stanley lifted its dividend by 8.8% to 92.5 cents. It also authorized a $20-billion repurchase plan.
In addition to large banks, several mid-sized lenders like Ally Financial and Fifth Third Bancorp (FITB - Free Report) were part of this year’s stress test. Effective 2019, these mid-sized banks (with assets between $100 billion and $250 billion) are tested every alternate year.
Fifth Third's Common Equity Tier 1 (CET1) ratio of 10.5% as of Mar 31, 2024, significantly exceeds the regulatory minimum of 4.5% plus the stress capital buffer, reflecting strong capital levels.
In September, FITB proposes to recommend to its board of directors a 2-cent per share increase to the quarterly cash dividend, consistent with its planned capital actions submitted with the Fed. FITB may elect to repurchase shares consistent with its publicly stated CET1 target of 10.5%.
The 2008 financial crisis gave rise to this annual assessment, which covered institutions with at least $100 billion in assets. In an economic scenario regarded to be ‘severely adverse,’ the group's overall CET1 ratio, considered the highest-quality regulatory capital, would peak at 9.9%, well above the minimum requirement of 4.5%.
The positive performance of these banks in the test and their subsequent decision to raise dividends and announce share purchases indicate robust financial health and resilience.
The move is likely to boost investor confidence and could potentially lead to an increase in stock prices.
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Goldman (GS) & Others Boost Payouts Following Stress Test
Following the clearing of the Federal Reserve's 2024 Stress Test, the biggest U.S. banks took turns returning excess capital to shareholders through dividends and share repurchases.
Last week, the Fed reported that all 31 banks successfully weathered this year’s stress test. The test evaluates the capacity of the biggest U.S. banks to withstand a significant economic downturn. It is used to determine the most recent minimum capital requirements, which are meant to cushion possible losses.
Goldman Sachs Group Inc. (GS - Free Report) , JPMorgan Chase & Co. (JPM - Free Report) , and Bank of America Corp. (BAC - Free Report) were among those who bumped up payouts.
JPMorgan stated it was raising its quarterly dividend by 8.7% to $1.25 per share. It's the second time the company raised its quarterly dividend this year. JPM also authorized a new $30-billion share repurchase program, effective Jul 1, 2024.
Goldman Sachs's capital plan includes an increase in the common stock dividend from $2.75 to $3.00 per share. This increase is subject to approval by the firm’s board of directors at the customary third-quarter meeting.
Bank of America plans to increase its quarterly common stock dividend by 8% to 26 cents beginning in third-quarter 2024.
Citigroup Inc. (C - Free Report) , Morgan Stanley and several other large lenders also hiked their dividend payouts.
Citigroup performed better than expected in the stress test this year. The bank was the only one among its peers, which include Wells Fargo, BofA, Goldman, JPMorgan and Morgan Stanley, to exhibit lower losses in the stress test compared with the previous one.
Among the major banks, Citigroup was the only one to witness a decline in its capital ratio requirement for the upcoming year, from 12.3% to 12.1%. The company only raised its quarterly dividend payment to $0.56 per share or 6%.
Morgan Stanley lifted its dividend by 8.8% to 92.5 cents. It also authorized a $20-billion repurchase plan.
In addition to large banks, several mid-sized lenders like Ally Financial and Fifth Third Bancorp (FITB - Free Report) were part of this year’s stress test. Effective 2019, these mid-sized banks (with assets between $100 billion and $250 billion) are tested every alternate year.
Fifth Third's Common Equity Tier 1 (CET1) ratio of 10.5% as of Mar 31, 2024, significantly exceeds the regulatory minimum of 4.5% plus the stress capital buffer, reflecting strong capital levels.
In September, FITB proposes to recommend to its board of directors a 2-cent per share increase to the quarterly cash dividend, consistent with its planned capital actions submitted with the Fed. FITB may elect to repurchase shares consistent with its publicly stated CET1 target of 10.5%.
The 2008 financial crisis gave rise to this annual assessment, which covered institutions with at least $100 billion in assets. In an economic scenario regarded to be ‘severely adverse,’ the group's overall CET1 ratio, considered the highest-quality regulatory capital, would peak at 9.9%, well above the minimum requirement of 4.5%.
The positive performance of these banks in the test and their subsequent decision to raise dividends and announce share purchases indicate robust financial health and resilience.
The move is likely to boost investor confidence and could potentially lead to an increase in stock prices.