U.S. banks will have to pay an additional $ 2 billion in quarterly dividends

The largest U.S. banks on Monday announced they would pay investors an additional $ 2 billion in dividends in the next quarter after the Federal Reserve reduced the payment restrictions on shareholders imposed on the Covid-19 pandemic last week.

The move underscores the confidence of major US lenders, who believe they can return more capital to shareholders and still remain comfortable above the levels mandated by the Fed.

The Fed released its results last Thursday “Stress tests” for banks, which pushed the U.S. central bank more ease restrictions on dividends and purchases.

Morgan Stanley announced that it would double its quarterly dividend to 70 cents a share and increase the size of its share purchase program from $ 10 billion to $ 12 billion.

James Gorman, CEO, said Morgan Stanley has “accumulated significant excess capital in recent years and now has one of the largest capital buffers in the industry.”

Other large banks also announced higher shareholder payments, but many did not follow Morgan Stanley by increasing the size of its purchase programs.

Goldman Sachs raised its dividend from $ 2 from $ 1.25, JPMorgan Chase raised it from $ 90 cents to $ 1, and Bank of America raised its dividend from 18 cents to 21 cents.

Wells Fargo doubled its dividend by 20 cents, even though the bank lowered its dividend by 51 cents a year ago. Like Morgan Stanley, the bank said it planned to spend about $ 18 billion to buy its shares in the 12 months beginning in the third quarter.

As investors updated on 11 banks on Monday, increased dividends will bring shareholders an additional $ 2 billion in the third quarter, according to the Financial Times.

Buying their shares is more expensive for banks than when the Fed imposed pandemic restrictions, as their shares are now more expensive. Stock prices have risen since September, in some cases to the highest, behind the rise in trading and trading activities and also looking to the future. US economy.

Many banks have already announced major share repurchase programs since the December stress test round, including JPMorgan, which signed a $ 30 billion deal, and Bank of America, which approved a $ 25 billion authorization.

Shares of Morgan Stanley gained 2.5 percent in post-New York trading hours and Goldman rose 0.6% while shares of other major banks were flat. Wellsen’s share fell 0.7 percent.

Jamie Dimon, CEO of JPMorgan, said: “The long-standing capital hierarchy remains the same: invest and grow in the leading businesses in our market… Pay a permanent dividend, and return the remaining surplus capital to shareholders.”

David Solomon, CEO of Goldman, said: “Progress in reducing the capital intensity of our business encourages us as reflected in the results of recent stress tests.”

Studies conducted by the Fed last week concluded that the 23 banks included in the exercise could suffer a combined loss of nearly $ 500 billion and still be able to comfortably meet capital requirements.

Additional report by Colby Smith in New York