Big banks are paying dividends to their shareholders after receiving a clean health bill from the Federal Reserve, and bank analysts say the payback windfall is just the beginning.
last thursday The Fed has cleared all 23 large banks it tested in its annual stress training. which examines each company’s ability to withstand a hypothetical severe recession.
in the face of a real recession last year. The Fed has imposed restrictions on dividends and share buybacks at big banks to maintain capital. But last week’s stress test results led the Fed to believe it could lift those temporary restrictions.
As a result, several banks on Monday afternoon announced additions to their dividend plans.
Morgan Stanley (MS) and Wells Fargo (WFC) both paid dividends (to $0.70 per share and $0.20 per share, respectively). The nation̵7;s largest bank, JPMorgan Chase (JPM), has raised its dividend to $1.00 each. Shares from $0.90 per share
Michael Brown, an analyst at KBW at Stifel, said in a note on Tuesday that the dividend increase was better than expected across the board. He added that the return on investment should be “Still higher in the medium term”
Wells Fargo senior analyst Mike Mayo told Yahoo Finance ahead of the stress test that he forecasts big banks to deliver $127 billion in capital this year, compared with $63 billion in 2020.
Similarly, RBC Capital Markets analyst Gerard Cassidy said the bank may have more room to operate.
“Large banks’ capital levels remain strong. And investors should continue to expect that excess funds that cannot be used to expand the company’s core business either organically or through acquisitions. will eventually be returned to shareholders,” Cassidy said in a note on Tuesday.
The bank prepares to report the results for the second quarter starting July 13
Brian Cheung is a reporter covering the Fed, Economics and Banking for Yahoo Finance. You can follow him on Twitter. @bcheungz.
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