The largest U.S. bank on Monday announced plans to pay investors $2 billion in additional dividends next quarter. After the Federal Reserve (Fed) eased restrictions on shareholder payments it had set during the coronavirus pandemic. last week
The move reinforced the confidence of major US lenders. which thinks they can return more capital to shareholders. and remain at a comfortable level above the level set by the Fed.
On Thursday, the Fed released its results. The “stress test” for banks, which made the Federal Reserve Relax additional restrictions on dividends and buybacks.
Morgan Stanley announced it has doubled its quarterly dividend to 70 cents per share and increased the size of its share buyback program from as much as $10 billion to as much as $12 billion.
Chief Executive James Gorman said Morgan Stanley “has accumulated a large amount of excess capital over the years. And now it has one of the largest reserves in the industry.”
Other big banks have also announced higher shareholder payouts. But many have not followed Morgan Stanley by increasing the scale of their buyback programs.
Goldman Sachs increased its dividend to $2 from $1.25, JPMorgan Chase increased its dividend to $1 from 90 cents, and Bank of America increased its dividend to 21 cents from 18 cents.
Wells Fargo doubled its dividend to 20 cents, although the bank cut its dividend last year from 51 cents. Like Morgan Stanley, the bank said it also plans to spend about $18 billion in the initial 12 months in the quarter. Third, to buy back their own shares
For 11 banks that updated investors on Monday The dividend increase will result in an additional $2 billion for shareholders in the third quarter. According to the Financial Times calculations
Its own share buybacks are more expensive for banks than they were when the Fed imposed epidemic restrictions. Because now their stock is more expensive. The share price has been rising since September. In some cases, it may reach the highest level. from the boom of trading activities and making deals. as well as a brighter outlook for the US economy.
Several banks have announced massive share buyback programs since the last round of stress testing in December, including JPMorgan, which signed one in $30 billion, and Bank of America, which approved $25 billion.
Shares in Morgan Stanley were up 2.5 percent in after-hours trading in New York and Goldman were up 0.6 percent, while other big bank stocks were flat. Wells’ stock was down 0.7 percent.
JPMorgan Chief Executive Jamie Dimon said: “Our long-standing capital hierarchy remains the same — invest and grow our market leading businesses . with the shareholders.”
Goldman Chief Executive David Solomon said: “We are encouraged by progress in reducing capital concentrations in our business. This is reflected in the latest stress test results.”
A Fed analysis last week concluded that 23 banks included in the exercise could suffer a combined loss of nearly $500 billion. And can also meet the needs of funds with ease.
Additional reporting by Colby Smith in New York.