2nd UPDATE: JPMorgan Leads Banks Set To Raise Dividend After Stress Test
March 13 2012 - 5:06PM
Dow Jones News
J. P. Morgan Chase & Co. (JPM) led a flurry of the biggest
U.S. banks in announcing dividend raises and stock buybacks, two
days before the Federal Reserve was set to release the results of
this year's stress tests.
J.P. Morgan's surprise announcement Tuesday, that it would
increase its dividend by a nickel and launch a new $15 billion
stock repurchase program, sent rival banks scrambling to make their
own announcements. The Fed moved up the release of the results to
4:30 EDT on Tuesday.
Bank of America (BAC) has also passed the Fed's stress tests,
according to people familiar with the matter, but it did not seek
to raise dividends or a new buyback authorization.
Morgan Stanley (MS) said Tuesday it received no objection from
the Fed for its 2012 capital plan, including the potential cash
acquisition of an additional 14% of Morgan Stanley Smith Barney and
ongoing payment of current common and preferred dividends.
USBancorp (USB) boosted its dividend by 56%, and PNC Financial
Corp. (PNC) said it passed the stress test, according to a person
familiar with the matter. BB&T Corp. (BBT) said the Fed had no
objection to it raising its dividend by 4 cents.
J.P. Morgan said on Tuesday "we are pleased to be in a position
to increase our dividend and to establish a new equity repurchase
program."
Several bankers said they are pleased with their banks' results
but weren't willing to give out specifics before the Fed's own
statement.
The Fed had planned to release the results of this year's
Comprehensive Capital Analysis and Review, or stress tests, on
Thursday afternoon. It decided to move up the timing after some
banks had disclosed their results, the Fed said. The tests look at
how the 19 biggest U.S. banks would fare in a severe downturn,
including an unemployment rate of 13%, a 21% decline in housing
prices and a 50% drop in equity prices.
Many banks are expected to raise dividends and increase share
buybacks four years after the financial crisis as capital levels
have improved and losses from bad loans continued to abate. Last
year was the first time since the crisis that several banks were
allowed to raise dividends.
In a report last month, Credit Suisse analysts estimated U.S.
banks could double their capital payouts to shareholders,
projecting an average of 47% of their earnings in 2012, up from 23%
last year.
Of the 19 banks subject to this year's test, Regions Financial
Corp. (RF) is the only one left that hasn't repaid funds received
under the Troubled Asset Relief Program, the crisis-year emergency
fund used to shore up bank capital levels. Analyst expect the bank
to raise capital to repay TARP.
Bank stocks jumped in afternoon trading on the stress test
results. JPMorgan's shares surged 7.03%, to $43.43 and Bank of
America shares rose 6.26%, to $8.49. Morgan Stanley rose 4% to
$18.93. USBank rose 4.8%, to $31.01, while PNC rose 4.1%, to
$61.94. BB&T rose 3.7% to $30.40.
--Dan Fitzpatrick and Brett Philbin contributed to this
report.
-By Liz Moyer, Dow Jones Newswires; 212-416-2512;
liz.moyer@dowjones.com
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