JPMorgan, BofA and other top banks shower investors with fatter dividends after easily passing the Fed’s stress tests

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The biggest US banks took turns announcing higher payouts to investors Friday after easily passing the Federal Reserve’s annual stress test earlier this week.

JPMorgan Chase & Co., Goldman Sachs Group Inc. and Bank of America Corp. were among firms that announced the increases two days after the regulator’s review showed that all 31 banks examined would maintain enough capital to withstand a hypothetical economic downturn. 

Citigroup Inc., Wells Fargo & Co. and Morgan Stanley, as well as several other large lenders, also boosted their dividends. In addition, JPMorgan and Morgan Stanley approved stock repurchase programs of as much as $30 billion and $20 billion, respectively.

Many of the banks’ payouts had already accelerated this year as they gained confidence that proposed tighter capital rules, known as Basel III Endgame, would be watered down.

Bank New quarterly dividend Previous quarterly dividend
Bank of America 26 cents 24 cents
Citigroup 56 cents 53 cents
JPMorgan $1.25 $1.15
Morgan Stanley 92.5 cents 85 cents
Wells Fargo 40 cents 35 cents
Goldman Sachs $3.00 $2.75

The Fed required the banks to wait until after the market closed Friday to announce any updates, allowing time for each firm, as well as investors, to digest the results. 

This year’s annual exam, a product of the 2008 financial crisis, included banks with at least $100 billion of assets. For the entire group, the so-called common equity tier 1 capital ratio — deemed to be the highest-quality regulatory capital — would bottom out at 9.9% in a “severely adverse” economic scenario, well above the 4.5% minimum requirement. 

Even as banks breezed through, the stress tests are still the subject of intense debate among economists and policymakers. Excess volatility in the Fed’s models means that the scenarios and exams should be subject to greater public scrutiny, according to Francisco Covas, head of research at the Bank Policy Institute.

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