6 Biggest US Banks Ramp Up Buybacks, Undeterred By Stress Tests

The six biggest banks in the U.S. have not let this week’s stress tests on capital levels deter them from returning value to shareholders.

JPMorgan Chase & Co. JPM, Bank of America Corporation BAC, Wells Fargo & Company WFM, Citigroup Inc. C, U.S. Bancorp USB and The PNC Financial Services Group, Inc. PNC bought back more than $14 billion in shares in the first quarter, registering a 73% leap from the pace set in the last six months of 2023, Bloomberg reported.

The annual stress test, which came out of the 2008 financial crisis and is set to release the latest results on Wednesday, often determines how eager banks are in returning capital to shareholders through dividends and buybacks.

The yearly exams require banks to consider hypothetical crisis scenarios and estimate the losses they might sustain based on their books of business as a way to determine how much capital they can pay out to investors, based on a minimum requirement known as the stress capital buffer.

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They had initially held back on buybacks last year in response to new capital-rule proposals, but the Fed has indicated loosening those measures through “broad and material changes,” according to Chairman Jerome Powell.

The proposals, which are called Basel III Endgame and were unveiled in 2023 by The Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of Currency, would require banks to up their capital by 19%. The Fed, however, has shown changes that would result in a capital increase of only 5%, according to Bloomberg.

Price action: JPMorgan Chase and Bank of America both slipped 0.85% in Wednesday’s early-morning trading, while Wells Fargo ticked up 0.52%. Citigroup declined 1.22% as U.S. Bancorp shed 1.02% and PNC Financial Services dipped 0.52%.

Invesco KBW Bank ETF KBWB lost 0.80% in the early-morning session, while SPDR S&P Bank ETF ARCA:KBE) and First Trust Nasdaq Bank ETF FTXO both fell 0.85.

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