Following the clearing of the Federal Reserve's 2025 stress test, the large U.S. banks took turns returning excess capital to shareholders through dividends and share repurchases.
The stress test, designed to assess how banks would fare during a severe economic downturn, confirmed that all 22 banks have cleared the test. The average Common Equity Tier 1 capital ratio across the group stood at 11.6%, well above the regulatory minimum of 4.5%. This showed they have enough capital to withstand scenarios, including a severe economic downturn, spiking unemployment and market turmoil.
JPMorgan JPM, Goldman Sachs GS, Morgan Stanley MS and Bank of America BAC were among those who bumped up payouts.
Details of Banks' Payout Boost
JPMorgan has announced that it intends to increase the quarterly common stock dividend by 7.1% from the prior payout to $1.50 per share for the third quarter of 2025. In addition, the company’s board of directors authorized a common share repurchase program of $50 billion, effective immediately.
Jamie Dimon, chairman and CEO of JPMorgan, stated, “The Board’s intended dividend increase, our second this year, represents a sustainable level of capital distribution to our shareholders and is supported by our strong financial performance. The new share repurchase program provides the ability to distribute capital to our shareholders over time, as we see fit.”
Bank of America announced plans to increase its quarterly common stock dividend 7.6% from the prior payout to 28 cents per share beginning in the third quarter of 2025. Meanwhile, Goldman Sachs plans to raise its dividend by a whopping 33.3% to $4 per share.
Morgan Stanley announced that it would increase its quarterly common stock dividend by 7.5% from the prior payout to $1 per share, subject to approval by the board of directors. In addition, Morgan Stanley’s board of directors reauthorized a multi-year common equity share repurchase program of up to $20 billion, with no expiration date, beginning in the third quarter of 2025.
Among the other major banks, Wells Fargo plans to hike its dividend 12.5% to 45 cents a share, subject to approval by the company’s board of directors. Likewise, PNC Financial plans to recommend to its board of directors an increase in the quarterly cash dividend of 6% to $1.70 per share.
Moreover, State Street plans to raise its dividend 11% to 84 cents, whereas Bank of New York Mellon expects to raise its dividend 13% to 53 cents a share.
Final Words on Banks’ Plan to Boost Payouts
The positive performance of major banks, including JPM, MS, GS, BAC, WFC, PNC, STT and BK in the stress test, and their subsequent decision to raise dividends and announce share repurchases indicate robust financial health and resilience.
The increases in dividends and buybacks are expected to enhance shareholder returns and boost investor confidence, leading to a rise in stock prices.
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The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report Bank of America Corporation (BAC): Free Stock Analysis Report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report Morgan Stanley (MS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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