U.S banks, including JPMorgan Chase & Co JPM, Wells Fargo & Co WFC and Morgan Stanley MS, are planning to raise their quarterly dividends after clearing the Federal Reserve’s annual stress test.
JPMorgan intends to increase the quarterly common stock dividend to $1.05 per share from the current $1.00 for the third quarter of 2023. Wells Fargo, on the other hand, said it would hike its third-quarter common stock dividend to 35 cents per share from 30 cents per share, reported Bloomberg.
Citigroup Inc C also suggested a rise in its quarterly dividend by two cents.
On Wednesday, the Federal Reserve’s released its report indicating that all 23 major U.S. lenders under examination are well-equipped to withstand the impact of a severe global recession, even with unemployment surging to 10% and a 40% decline in the commercial real estate market values.
Passing the stress test typically paves the way for banks to distribute billions of dollars to investors through dividends and stock repurchases, according Bloomberg.
The stress-test criteria were established prior to the regional bank turbulence in March, which means the test did not evaluate banks based on the repercussions of the interest rate hikes that recently affected midsize lenders.
“We remain prepared for a broad range of potential outcomes, including potentially higher future capital requirements from the finalization of the Basel III capital rules,” JPMorgan CEO Jamie Dimon said in a statement, according to Bloomberg.
JPMorgan has experienced a notable turnaround compared to its previous year. To bolster its capital reserves after the required CET1 ratio increased from 11.2% to 12%, the firm temporarily halted share buybacks for the latter half of 2022.
JPMorgan’s Chief Financial Officer Jeremy Barnum said that the stress capital buffer surpassed expectations, leading to the decision to raise the quarterly dividend, Bloomberg reported.
According to the report, Citigroup will face a higher stress capital buffer in the coming quarters.
“While we would have clearly preferred not to see an increase in our stress capital buffer, these results still demonstrate Citi’s financial resilience,” Citigroup Chief Executive Officer Jane Fraser said in a statement. “We repurchased $1 billion of common stock during the second quarter, intend to increase our dividend, and will continue to evaluate capital actions on a quarter-by-quarter basis.”