Jamie Dimon, CEO of JP Morgan Chase, during an interview with Jim Cramer, Feb. 23, 2023.
Large US banks included c. B. Morgan ChaseAnd Wells Fargo And Morgan Stanley They said on Friday that they plan to raise the quarterly dividend payout after clearing the Fed’s annual stress test.
The New York-based bank said in a statement that JPMorgan plans to increase its payout to $1.05 per share from $1 per share beginning in the third quarter, subject to board approval.
“The results of the 2023 federal stress test show that banks are resilient — even withstanding severe shocks — and continue to serve as a pillar of strength for the financial system and the broader economy,” Jamie Dimon, CEO of JPMorgan, said in the release. “The Board’s intended increase in the dividend represents a higher modest and sustainable level of capital distribution to our shareholders.”
On Wednesday, the Fed released its annual exercise results and said all 23 banks that participated had cleared the regulatory hurdle. The test determines how much capital banks can return to shareholders through buybacks and dividends. In this year’s exam, banks succumbed to a “severe global recession” with unemployment soaring 10%, commercial real estate values plummeting 40%, and housing prices falling 38%.
After completing the test, Wells Fargo said it would increase its dividend to 35 cents per share from 30 cents per share, and Morgan Stanley said it would boost its payout to 85 cents per share from 77.5 cents per share.
Goldman Sachs announced the largest payout per share among major banks, raising its dividend to $2.75 per share from $2.50 per share.
City is small
Meanwhile, Citigroup said it would increase its quarterly payout to 53 cents per share from 51 cents per share, the smallest increase among its peers.
That’s likely because while JPMorgan and Goldman surprised analysts this week with better-than-expected results that allowed for smaller capital stockpiles, Citigroup was among the banks that saw their reserves increase after a stress test.
“While we would have clearly preferred not to see an increase in turbulent capital reserves, these results continue to demonstrate Citi’s financial resilience through all economic environments,” Citigroup CEO Jane Fraser said in a statement to her company.
All the major banks have refrained from announcing specific plans to boost share buybacks. For example, both JPMorgan and Morgan Stanley said they could buy back shares using previously announced buyback plans; Wells Fargo said it has “the ability to buy back common stock” within the next year.
Analysts said banks are likely to be more conservative with their capital return plans this year. That’s because the finalization of international banking regulations is expected to boost the levels of capital that major global corporations like JPMorgan will need to maintain.
There are other reasons for banks to hold capital: Regional banks could also be subject to higher standards as part of regulators’ response to the Silicon Valley bank collapse in March, and a potential recession could increase future loan losses for the industry.