NEW YORK – The nation's largest banks are rewarding shareholders by spending tens of billions increasing dividends and buying back shares after receiving the green light from the Federal Reserve.
The Fed on Thursday said it had approved the capital planning the nation's 18 largest banks filed as part of this year's stress tests. This means that it is established that banks can increase dividends and buy back more shares this year and still have enough capital to survive a hypothetical deep recession next year.
Read: JPMorgan and Capital One had to lower shareholder payments to get Fed approval
Immediately after Fed's announcement, the big banks began to uncover their plans.
JPM, + 0.33%
nation's largest bank of assets, said it plans to repurchase $ 29.4 billion in shares this cycle. It will also increase the dividend 12.5% to 90 cents per share. In total, JPMorgan would return about $ 40 billion to shareholders through dividends and share purchases over the next year.
WFC, + 1.07%
announced plans to buy back $ 23.1 billion in stock next year and increase dividends 13.3% to 51 cents per share. The bank is still being investigated by state and federal authorities for violent banks.
C, + 1.38%
said it would buy back $ 17.1 billion in stock next year and also plan to increase its yield to 13.3% to 51 cents per share.
Overall, Fed Nation's 18 largest banks expect to return more than 100% of their expected earnings to shareholders this annual cycle. Otherwise, these banks collectively spend more on dividends and share purchases than they expect to earn in profits this year.
The Central Bank's stress tests were mandated after the Great Recession under the Dodd Frank Act. They are designed to test if a large bank could survive a sudden economic downturn without imploding, as it was a decade ago.
JPMorgan and Capital One
was granted approvals on their capital plans only after both returned their plans. The original drafts of JPMorgan and Capital One's plans showed they were too under-capitalized in a worse case. The Fed also asked a European bank, Credit Suisse