Morgan Stanley doubles its dividend as banks begin rising payouts after Fed stress exams
A combined file photo shows Wells Fargo, Citibank, Morgan Stanley, JPMorgan Chase, Bank of America and Goldman Sachs.
(This is a groundbreaking story. Check back for updates.)
Wall Street powerhouse Morgan Stanley doubled its quarterly dividend and announced a new $ 12 billion share buyback plan.
The bank said in a press release on Monday that its dividend will rise to 70 cents per share from the third quarter and that it will buy up to $ 12 billion of treasury stock by June 2022. Morgan Stanley’s shares were up 4%.
“Morgan Stanley has accumulated significant excess capital over the past few years and now has one of the largest capital buffers in the industry,” said CEO James Gorman in the press release. “The actions taken by the board reflect the decision to realign our capital base to meet the needs of our transformed business model.”
Meanwhile, bigger rival JPMorgan Chase has increased its dividend from 90 cents to $ 1 per share, the bank said. JPMorgan said it was “still authorized” to tap into an existing share buyback plan.
Bank of America announced that its dividend would rise to 21 cents a share from previously 18 cents. In April, the bank announced a $ 25 billion share buyback plan.
Last week, the Federal Reserve announced that all 23 banks that passed the 2021 stress test passed the industry “well above” capital requirements in a hypothetical economic downturn. While the institutions would post losses of $ 474 billion in this scenario, the loss-absorbing capital would still be more than double the required minimum level.
The test was a major milestone for American banks and came a year after a global pandemic threatened to subject the industry to a real-life stress test. After playing a key role in the 2008 financial crisis, banks had to undergo the annual ritual of asking regulators for permission to raise dividends and buy back stocks.
Now banks will regain the flexibility in how to spend capital in the form of dividends and buybacks. As long as they keep the capital level above the so-called stress capital buffer, banks can make more of their own decisions. The new regime was supposed to start last year, but the pandemic kicked in.
While analysts have said that bank investors have mostly considered higher payouts from banks, higher-than-expected capital plans can still be viewed positively. The banks are expected to publish comments on their plans starting Monday at 4:30 p.m.
This story evolves. Please check again for updates.
Become a smarter investor with CNBC Pro.
Get stock picks, analyst calls, exclusive interviews and access to CNBC TV.
Sign in to get started Try it for free today.