March 26 (Bloomberg) -- Bank of New York Mellon Corp., the world’s largest custody bank, will buy back as much as $1.74 billion in stock and boost its quarterly dividend starting in the second quarter after the Federal Reserve approved its capital plans.
BNY Mellon plans to increase its quarterly dividend by 13 percent, the New York-based company said in today’s statement. That would mean an increase in the quarterly dividend to 17 cents a share from 15 cents.
State Street Corp., the second-largest independent custody bank, plans to increase its dividend by 15 percent to 30 cents a share in the second quarter, while reducing its annual share buyback by 19 percent to $1.7 billion. Northern Trust Corp., the third-largest independent custody bank, said it would boost its quarterly dividend 6.5 percent to 33 cents per share from 31 cents, and buy back as much as $425 million in stock between April 2014 and March 2015.
Regulators seeking to prevent a repeat of the 2008 financial crisis have run annual tests on how the largest banks would fare in a similar recession or economic shock. Citigroup Inc.’s capital plan was among five that failed Federal Reserve stress tests, while Goldman Sachs Group Inc. and Bank of America Corp. passed only after reducing their requests for buybacks and dividends.
Banks typically announce planned dividend increases and buybacks shortly after the Fed releases results of the stress tests. Increases may boost yields closer to the norms that prevailed before the financial crisis, when the stocks were favored by income-oriented investors.
BNY Mellon shares have gained 0.6 percent this year and Northern Trust have climbed 4.5 percent. State Street shares have declined 6.5 percent this year.
To contact the reporter on this story: Charles Stein in Boston at email@example.com
To contact the editors responsible for this story: Christian Baumgaertel at firstname.lastname@example.org Sree Vidya Bhaktavatsalam, Josh Friedman