US Banks Bump Up Dividends Following Fed's Successful Stress Test

Several prominent U.S. banks have declared their intentions to raise their dividends for Q3, following their successful performance in the Federal Reserve’s annual stress test.

What Happened: U.S. banks such as JPMorgan Chase & Co JPM, Bank of America Corp BAC, and Citigroup Inc C have decided to increase their dividends for the third quarter.

This decision comes in the wake of the banks proving their resilience against severe economic and market disruptions in the Federal Reserve’s yearly health assessment, reports Reuters.

The largest U.S. lender, JPMorgan Chase, has upped its dividend to $1.25 per share from $1.15 and has approved $30 billion in fresh share buybacks, effective July 1. Bank of America and Citigroup have also raised their dividends to 26 cents and 56 cents per share, respectively.

Brian Mulberry, a client portfolio manager at Zacks Investment Management, told the outlet, “Banks are going to remain conservative on capital as uncertainty over the Basel proposal remains.”

Morgan Stanley MS and Goldman Sachs GS have also declared dividend increases to 92.5 cents and $3 per share, respectively. These announcements were made after the banks’ successful completion of the Fed’s stress test earlier this week, which assesses the capital they need to reserve before they can distribute money to shareholders.

Also Read: Bank of America Analyst Highlights Fed Stress Test Opacity, Varying Bank Impacts: ‘Goldman Sachs Worst Hit, Huntington Best’

Goldman Sachs’ CEO David Solomon said, according to Reuters, “This increase does not seem to reflect the strategic evolution of our business and the continuous progress we've made to reduce our stress loss intensity.”

Wells Fargo & Co WFC also announced a dividend increase to 40 cents. This year, 31 large banks were tested, compared to 23 last year.

The evaluations demonstrated that banks would have sufficient capital to continue lending under several scenarios, including a significant rise in unemployment, extreme market volatility, and drops in residential and commercial mortgage markets.

Why It Matters: The Federal Reserve’s annual stress test is a critical measure of a bank’s ability to withstand economic and market disruptions.

The successful performance of these banks in the test and their subsequent decision to raise dividends indicates their robust financial health and resilience.

This move is likely to boost investor confidence and could potentially lead to an increase in their stock prices.

Now Read: Fed’s 2024 Stress Test Results Worse Than Expected, Says Goldman Analyst: ‘The Market Will View The Results As Disappointing’

This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

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