As expected, the Federal Reserve lifted the dividend and buyback restrictions on the banking industry during the epidemic early, and the big U.S. banks began to actively pay “bonuses” to shareholders.
After the bell on Monday, June 28th, Morgan Stanley announced that it would raise its dividend for the third quarter of this year from $0.35 per share to $0.70 per share, and announced a new share buyback program, with plans to buy back up to $12 billion in stock by June 2022.
Morgan Stanley CEO Gorman said the bank has accumulated a huge amount of excess capital over the past few years and now has one of the largest capital buffers in the industry.
A number of banks have also announced plans to give back to shareholders after the bell, with Morgan Stanley by far the biggest: ▪ Wells Fargo said it will buy back $12 billion of stock this year.
Wells Fargo said it will double its dividend for the third quarter of this year, rising to $0.20 per share.
Goldman Sachs’ quarterly dividend will be raised 60% to $2.00 per share.
Bank of America plans to raise its quarterly dividend by 17 percent to $0.21 per share.
▪ JPMorgan Chase said it will raise its quarterly stock dividend by 11% to $1.00 per share and will continue to repurchase shares.
▪ Citi did not disclose the exact size, but said it will continue to take action to return capital, pay at least $0.51 per share in dividends, and continue to buy back shares.
▪ State Street said it will raise its quarterly stock dividend to $0.57 per share and continue to repurchase shares in the coming quarters.
▪ Bancorp plans to raise its dividend by 9.5 percent to $0.46 per share in the third quarter, saying its existing share repurchase program remains in effect.
Goldman Sachs CEO Solomon said the results of recent stress tests reflect progress in reducing the capital intensity of our business. JPMorgan Chase CEO Dimon said the Fed’s stress test once again demonstrated that our bank continues to have strong capitalization and can withstand extreme outcomes while continuing to provide support to the overall economy.
After the announcement of actions such as increased stock dividends, the shares of these banks rose after the bell on Monday, Morgan Stanley was up 4% after the bell, Goldman Sachs had risen more than 2%, Wells Fargo had risen more than 1%, but some banks failed to keep the gains, once up nearly 1% Bank of America turned down, Citi and JP Morgan Chase also turned down.
Wall Street News article mentioned last week, the Federal Reserve last Thursday announced the results of this year’s stress test, all tested 23 large banks are maintained at levels well above the minimum capital requirements associated with risk, in an extremely negative environment, 23 large banks core tier 1 capital adequacy ratio is still more than double the minimum level of regulatory requirements.
The ease with which the big banks passed their stress tests means that the Federal Reserve can end its dividend and share buyback restrictions on U.S. banks three months earlier than planned, paving the way for the banking industry to give back to shareholders in a big way starting in early July.
Barclays expects that the size of the six largest U.S. banks — JPMorgan Chase, Bank of America, Wells Fargo, Citi, Morgan Stanley and Goldman Sachs — giving back to shareholders through dividends and buybacks will likely double to $142 billion over the next four quarters.
But Zoltan Poszar, an investment strategist at Credit Suisse, warned that the post-June 30 buyback spree will “destroy the balance sheet capacity of the banking system” because banks will have less capital to leverage after they give back to shareholders. quarter-end to keep liquidity on hold. He noted that ample liquidity is only ample if banks are willing to trade it, and since the Fed’s reverse repo tool could complicate the situation with the restart of share repurchases in early July, big banks may be reluctant to trade liquidity at such times.