Three regional banks reported Friday that the amount of incremental capital they're required to hold will increase following recent regulatory stress tests, while four larger banks said they'll be allowed to hold smaller buffers.
The announcements followed
Regional banks have been facing heightened scrutiny since
On Friday, Capital One Financial, Citizens Financial Group and Truist Financial all said that they expect their so-called stress capital buffers, which are set by their regulators, to increase this fall. None of the three announced changes to their plans for shareholder dividends and buybacks.
The stress capital buffer, which is at least 2.5% of a bank's risk-weighted assets, gets added to a 4.5% capital requirement in order to calculate a bank's total common equity tier 1 capital requirement. The largest, systemically important global banks also get assessed a capital surcharge of at least 1%.
John Woods, the chief financial officer at Citizens, said in a statement that the firm's company-run stress tests imply a significantly smaller capital drawdown than the Fed's models. The Fed has told Citizens that its preliminary stress capital buffer is 4.0%, up from 3.4% last year.
Providence, Rhode Island-based Citizens did not comment on its plans with respect to issuing dividends. It said that as of June 30, it had $1.344 billion of remaining capacity under a previously authorized share repurchase program.
Truist CEO William Rogers said in a statement that the bank got a roughly 30-basis point boost to its common equity tier 1 capital ratio from
Truist did not comment on any share buyback plans, but said that it plans to maintain its 52-cent per share dividend. The Charlotte, North Carolina-based company expects its stress capital buffer to rise from 2.5% to 2.9% this fall.
Capital One anticipates a larger increase in its stress capital buffer, from 3.1% to 4.8%. The McLean, Virginia-based bank, which made no additional comment, specializes in the credit card business, which would accumulate substantial losses in the Fed's severely adverse scenario.
In that scenario, the central bank projected that the industry as a whole would lose $120 billion on credit card loans, or 22% of total projected losses.
Meanwhile on Friday, some of the nation's biggest banks made rosier announcements about their own capital requirements. JPMorgan Chase, Goldman Sachs, Morgan Stanley and Wells Fargo all said that they expect their stress capital buffers to decline, and they all announced plans to increase their quarterly dividends.
The largest decreases were announced by JPMorgan, which said that it expects its stress capital buffer to fall from 4.0% to 2.9%, and Goldman, which anticipates a decline from 6.3% to 5.5%.
"We continue to maintain a fortress balance sheet with strong capital levels and robust liquidity, and we remain prepared for a broad range of potential outcomes, including potentially higher future capital requirements from the finalization of the Basel III capital rules," JPMorgan CEO Jamie Dimon said in a press release.
The nation's largest bank by assets plans to continue its current share buyback program. JPMorgan and several other large banks
"The [JPMorgan] Board's intended dividend increase represents a sustainable and modestly higher level of capital distribution to our shareholders, which is supported by the combination of our strong financial performance and continuous investment in our businesses," Dimon said.
The one big bank that announced a larger stress capital buffer on Friday was Citigroup. It expects its buffer to be 4.3%, up from 4.0%. CEO Jane Fraser said in a statement that Citi would have preferred not to see an increase, but added that the results demonstrate the bank's "financial resilience through all economic environments."
Notwithstanding the larger stress capital buffer, Citi said that it plans to increase its dividend from $0.51 per share to $0.53 per share in the third quarter.
Orla McCaffrey contributed to this report.
