JPMorgan Chase and Citigroup intend to keep their dividends unchanged next quarter, splitting with several other large banks that are raising their payouts to shareholders following Federal Reserve stress tests.
The two megabanks' more measured approach to capital distribution is not entirely surprising, given expectations that their regulatory capital minimums are set to go up later this year.
But several other banks that underwent the Fed’s annual stress tests said Monday that they will either raise their dividend or consider doing so at their next board meeting.
Bank of America, Wells Fargo, Bank of New York Mellon, Goldman Sachs, Morgan Stanley, State Street, Truist Financial, Northern Trust and Fifth Third Bancorp were among the banks that announced planned dividend increases on Monday.
Regions Financial and Citizens Financial Group said their boards will consider a dividend increase, though they did not share a specific amount.
The Fed’s stress tests, results of which were released last week,
JPMorgan Chase, the country’s largest bank by assets, said Monday that it will maintain its dividend at $1 per share next quarter “in light of higher future capital requirements.”
The bank’s common equity tier 1 capital ratio requirement is set to rise to 12% later this year — up from its current level of 11.2% — though the bank said that the Fed “will provide the firm with its final” capital requirement by the end of August.
In a press release, JPMorgan CEO Jamie Dimon said the nearly $4 trillion-asset bank continues “to maintain a fortress balance sheet” and that the Fed’s stress test showed banks’ resiliency to any “extreme market shocks” that may occur.
“We will continue to use our capital to invest in and grow our market-leading businesses, pay a sustainable dividend, and we will retain capital to fully satisfy our future regulatory requirements,” Dimon said.
Citigroup announced that its stress capital buffer requirement, which is set by the Fed, will go up by 1 percentage point.
Citi CEO Jane Fraser said that stress test results showed the bank “has the capital to withstand a severe economic downturn.” The bank has “capacity to maintain” its current dividend of 51 cents per share under a range of stress scenarios, Fraser said.
“We are committed to executing the strategy we presented at Investor Day, improving our returns and delivering excess capital to our investors,” she said.
Huntington Bancshares also plans to keep its dividend steady at $0.155 per common share, the $177 billion-asset bank said. But Columbus, Ohio-based Huntington has a higher dividend yield than its peers, even accounting for their planned dividend increases, Autonomous Research analyst John McDonald wrote in a note to clients.
Minneapolis-based U.S. Bancorp did not announce a dividend increase but left the door open to doing so after it finalizes its acquisition of MUFG Union Bank’s retail franchise. The deal, which is pending regulatory approval, is
The Fed had told banks to wait until late Monday afternoon to disclose information about their capital distribution plans and their individual stress capital buffer standards.
Despite a more rigorous hypothetical stress scenario than last year, each of the 33 banks examined retained far more than their minimum capital requirements in this year’s stress-test results.
Banks that made announcements Monday were mostly silent on new plans for buying back shares in the coming months. One exception was Providence, Rhode Island-based Citizens Financial, which announced that its board increased the bank’s share buyback program to $1 billion, up from a prior program of $750 billion that the bank has not tapped fully.
Morgan Stanley also said its board has approved a new multiyear buyback program of up to $20 billion that will begin next quarter, while Wells Fargo said it has “significant capacity” to conduct buybacks over the next year.
Overall, banks’ share buyback plans will likely not be “as robust this year as they were last year,” RBC Capital Markets analyst Gerard Cassidy wrote in a note to clients after Monday’s announcements. He attributed that trend to lower levels of excess capital at banks and expectations that loan growth will consume some capital, along with the negative impact on capital at major banks tied to
“The large banks' capital levels remain strong and investors should continue to expect that any excess capital that cannot be redeployed into growing the companies' core businesses either organically or through acquisition will eventually be returned to shareholders,” Cassidy wrote.
