By Nupur Anand
NEW YORK (Reuters) – U.S. banking giants announced plans on Friday to increase their third-quarter dividends after proving during the Federal Reserve’s annual health check that they have enough capital to weather severe economic and market turbulence.
JPMorgan Chase (NYSE:), the largest U.S. lender, increased its dividend from $1.15 to $1.25 per share, a filing shows. The board also authorized the repurchase of new shares worth $30 billion, effective July 1.
Bank of America’s dividend will rise from 24 cents to 26 cents per share, and Citigroup’s will rise from 53 cents to 56 cents, the lenders said in separate regulatory filings.
“Banks will remain conservative on capital as uncertainty surrounding the Basel proposal remains,” Brian Mulberry, client portfolio manager at Zacks Investment Management, said after the dividends were announced.
Banks have argued that higher capital requirements proposed under draft rules known as the Basel endgame could hamper their ability to make loans and harm the economy.
Morgan Stanley increased its dividend from 85 cents to 92.5 cents per share, a filing shows.
The announcements came after banks passed the Fed’s stress test earlier this week, which determines how much capital they must set aside before returning money to shareholders.
Goldman Sachs’ dividend will rise to $3 per share, up from $2.75 previously.
How well a bank performs during the stress tests determines the size of its stress capital buffer (SCB) – an additional capital buffer that the Fed requires banks to maintain to weather a hypothetical economic downturn.
Goldman said it will work with its regulator to better understand why its SCB has jumped.
“This increase does not appear to reflect the strategic evolution of our business and the continued progress we have made to reduce the intensity of our stressors,” CEO David Solomon said in a statement.
Wells Fargo’s dividend will increase to 40 cents.
This year, 31 major banks were tested, compared to 23 last year. The checks showed that banks would have sufficient capital to continue lending under several scenarios, including a large spike in unemployment, severe market volatility and a decline in the residential and commercial mortgage markets.
Bank New dividend Old dividend
(per share) (per share)
JPMorgan $1.25 $1.15
Bank of America 26 cents 24 cents
Citigroup 56 cents 53 cents
Wells Fargo 40 cents 35 cents
Goldman Sachs $3 $2.75
Morgan Stanley 92.5 cents 85 cents
