US Banks Boost Shareholder Returns After Sailing Through Fed Stress Test

Top U.S. banks raised their dividends, with some announcing fresh buyback programs, after easily passing the Federal Reserve’s stress test last week.

The test, which measured the banks' balance sheets against a worst-case scenario including 10% unemployment and a 33% drop in home prices, found that all 22 participating banks had sufficient strength to remain healthy.

“Large banks remain well capitalized and resilient to a range of severe outcomes,” said Michelle Bowman, the Fed’s vice chair for supervision.

The top U.S. bank, JPMorgan & Chase, boosted its dividend to $1.50 a share from $1.40 per share, as per a filing on Tuesday. The lender also launched a $50 billion share repurchase program, effective Tuesday, with a specific end date.

"The board’s intended dividend increase, our second this year, represents a sustainable level of capital distribution to our shareholders and is supported by our strong financial performance," JPMorgan CEO Jamie Dimon said in a statement.

Retail Sentiment on Stocktwits about JP Morgan stock was in the ‘bullish’ territory, while retail chatter was ‘high.’

The Federal Reserve's stress test revealed that banks retained an average 11.6% ratio of their common equity Tier 1 capital, far above the 4.5% minimum required by regulators. All six of the nation's largest banks successfully upheld double-digit capital ratios throughout the test.

Goldman Sachs said that it will increase its dividend to $4 from $3, while Morgan Stanley raised its quarterly dividend to $1 and initiated a $20 billion share buyback program.

Bank of America raised its dividend by 8% to 28 cents per share, Wells Fargo increased it to 45 cents a share from 40 cents, while Citigroup lifted its dividend to 60 cents from 56 cents.

The U.S. central bank is currently working on a proposal to average out the stress-test results over two consecutive years, in its bid to reduce volatility in the data and simplify the test for banks, which have long criticized the complexity of the examination.

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