The US banking giant announced plans to increase its third quarter dividend payout on Friday (June 28th) local time. Previously, these top banks passed the Federal Reserve's annual stress test, proving that they have sufficient capital to withstand severe economic and market turbulence.
On Wednesday (June 26th), all 31 major banks in the United States passed the Federal Reserve's annual stress test. The inspection shows that these banks will have sufficient capital to continue lending in the following situations, including a significant increase in unemployment rates, market volatility, and a sharp decline in the residential and commercial mortgage markets.
The Federal Reserve stated in its statement that under the assumption of an economic recession, every company can maintain above the minimum capital requirement, demonstrating strong capital strength and risk resistance. This test result also paves the way for higher dividend payouts in the banking industry.
According to a document, JPMorgan Chase, the largest bank in the United States, announced an increase in its dividend from $1.15 per share to $1.25. In addition, the board of directors has approved a $30 billion new share repurchase plan, which will take effect from July 1st.
Bank of America and Citigroup stated in their respective regulatory filings that Bank of America's dividend will increase from 24 cents per share to 26 cents, while Citigroup's dividend will increase from 53 cents per share to 56 cents.
Morgan Stanley increased its dividend from 85 cents per share to 92.5 cents; Goldman Sachs' dividend will climb from the previous $2.75 to $3 per share; The dividend of Wells Fargo Bank will rise to 40 cents, compared to 35 cents previously.
Overnight on Friday, US bank stocks generally rose, with JPMorgan Chase up 1.55%, Bank of America up 1.32%, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley up 3.1%, 3.43%, 1.43%, and 1.49%, respectively.
The annual stress test of the Federal Reserve, as an important measure to strengthen financial regulation after the 2008 financial crisis, covers banks with assets exceeding $100 billion. The relevant test results determine the capital required for banks to maintain healthy operation, as well as the capital that banks can return to shareholders through stock repurchases and dividends.
The test results show that under the assumed extremely unfavorable economic scenario, the average level of Tier 1 common equity capital ratio (CET1, as the highest quality regulatory capital) of these banks has significantly increased from the minimum requirement of 4.5% to 9.9%, demonstrating a capital adequacy ratio far exceeding the standard.