After passing the U.S. Federal Reserve’s annual stress test, the largest U.S. lenders are increasing their quarterly dividend payouts, with investment bank Goldman Sachs (GS) hiking its payout to shareholders by 25%.
Goldman Sachs has enacted one of the larger dividend increases, bringing its payment to $2.50 U.S. per share. Other U.S. banks followed Goldman Sachs’ lead with Bank of America (BAC) raising its quarterly dividend by 5% to $0.22 per share. Morgan Stanley (MS) said it was raising its quarterly payout by 11% to $0.78 a share, and Wells Fargo (WFC) boosted its dividend by 20% to $0.30 a share.
However, two of the largest American banks, JPMorgan Chase (JPM) and Citigroup (C), chose to keep their dividends unchanged, citing increasingly stringent capital requirements for their decision.
Overall, the dividend increases this year paled in comparison to last year’s actions coming out of the pandemic. Morgan Stanley, for example, had doubled its dividend after the 2021 stress test.
While all 34 banks involved in the Fed’s stress test passed the legal and regulatory requirement, industry analysts have said that an unexpected rise in stress capital buffers would mean that some of the biggest U.S. banks might have to keep dividends flat and scale back share buybacks.
JPMorgan confirmed those concerns, saying that “higher future capital requirements” are the reason it intends to keep its quarterly dividend at $1 U.S. per share. Citigroup said that it is keeping its quarterly payout at $0.51 U.S. a share.
In April of this year, JPMorgan Chase announced a new $30 billion U.S. stock repurchase plan that began on May 1.
U.S. bank stocks are broadly lower this year with the Dow Jones U.S. Bank Stock index down 25% since the beginning of January.
