Banks increase dividends after passing stress test. Their shares are on the rise.
Some of the largest banks in the country have announced plans to raise dividends after passing the Federal Reserve’s annual stress test earlier this week.
The Fed wanted banks to wait at least two days after the stress tests to reveal capital plans. After markets closed on Friday, JPMorgan Chase (ticker: JPM ) said it would increase its quarterly payout to $1.05 a share, up from $1. Morgan Stanley (MS) increased its dividend to 85 cents per share from 77.5 cents. Wells Fargo ( WFC ) raised its payout by 5 cents to 35 cents per…
Some of the largest banks in the country have announced plans to raise dividends after passing the Federal Reserve̵[ads1]7;s annual stress test earlier this week.
The Fed wanted banks to wait at least two days after the stress tests to reveal capital plans. After markets closed on Friday, JPMorgan Chase (ticker: JPM ) said it would increase its quarterly payout to $1.05 a share, up from $1. Morgan Stanley (MS) increased its dividend to 85 cents per share from 77.5 cents. Wells Fargo ( WFC ) raised its payout by 5 cents to 35 cents per share. Goldman Sachs ( GS ) raised its quarterly dividend from $2.50 to $2.75 per share. And Citigroup ( C ) lifted its payout by 2 cents to 53 cents per share.
Every year, the Fed tests bank defaulters to see if their balance sheets are strong enough to withstand severe stress in the economy and financial markets. Results released Wednesday suggest that all 23 participating banks would have enough capital to absorb as much as $541 billion in losses — in a doomsday scenario — even if unemployment were to hit 10% and the stock market were to fall 45%.
Bank stocks have lagged behind the broader market of late, as the collapse of a few mid-sized banks earlier this year sparked widespread concerns about the sector’s overall health and stability.
The latest stress test has given the market some renewed confidence and given the group a nice boost.
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JPMorgan shares are up 4.9% since Wednesday’s close, Wells Fargo has jumped 5.1%, Morgan Stanley shares are up 1.7% and Goldman Sachs shares are up 2.8%.
However, Citigroup shares have fallen 0.4% since Wednesday, a departure from the group.
Write to Evie Liu at evie.liu@barrons.com
