The Federal Reserve will tell some of the largest U.S. banks tomorrow whether it approved their plans to boost dividends and buy back more shares, a person briefed on the matter said.
The Fed ordered the 19 largest U.S. banks to test the performance of their loans, securities and capital against at least three possible economic outcomes under a second round of stress tests. The banks submitted plans in January. The results may be shared tomorrow, said the person, who asked not to be identified because the notifications are private. Barbara Hagenbaugh, a Federal Reserve spokeswoman, declined to comment.
Executives at banks such as JPMorgan Chase & Co. and Wells Fargo & Co. have asked regulators to approve higher dividends or stock buybacks as the firms recover from the financial crisis. The Fed told banks to consider “conservative” payouts and purchases that would still allow for “significant” build-ups of capital, according to a November notice.
Dividends equaling about 30 percent of earnings “will be the new normal,” Gerard Cassidy, an analyst at RBC Capital Markets, wrote in a Feb. 8 report.
Wells Fargo Chief Financial Officer Timothy J. Sloan said March 3 that the bank will “hopefully be in that first handful of institutions that get the approval” from officials to return more of its earnings to shareholders. San Francisco-based Wells Fargo, which slashed its dividend to 5 cents a share from 34 cents in May 2009, will announce an increase of the payout to 15 cents in April, analysts surveyed by Bloomberg estimate.
Wells Fargo and New York-based JPMorgan may be joined by Capital One Financial Corp., State Street Corp., Bank of New York Mellon Corp., PNC Financial Services Group Inc. and U.S. Bancorp in receiving approval to raise dividends, Cassidy wrote.
Bank of America Corp., the biggest U.S. lender, told investors March 8 that its dividend increase won’t come until the second half of this year, and the payout “will be modest as we continue to build the capital.” The bank is based in Charlotte, North Carolina.
The Wall Street Journal reported on the timing of the dividends earlier today.