Fed approves capital plans of 34 national, regional banks

Jun 30, 2017, 00:28
Fed approves capital plans of 34 national, regional banks

On Wednesday, the Fed said those lenders, including household names like JPMorgan Chase & Co (JPM.N) and Bank of America Corp (BAC.N), had passed the second, tougher part of its annual stress test.

Citigroup Inc (C.N) won a particularly notable victory, gaining permission to return almost US$19 billion to shareholders, or about 125 per cent of projected earnings over the next four quarters - a big bump from previous year, and more than analysts had expected.

European shares steadied on Thursday as banks extended a winning streak after the U.S. Federal Reserve cleared capital return plans from big banks, off-setting losses among utilities and construction stocks.

It's official: The On average, the group of firms taking part in the stress tests requested payouts that are near 100% of their expected earnings over the next year, up from 65% last year, senior Fed officials said.

As a result, most major banks, including Wells Fargo, Bank of America, SunTrust Banks, JPMorgan, American Express, and Discover Financial Services are raising their dividends.

Beth E. Mooney, Key's Chairman and Chief Executive Officer, stated, "We are pleased to share our CCAR capital plan, which is consistent with our commitment to maintain a strong capital position, while continuing to invest and deploy capital to build long term value for our shareholders".

"Banking stocks jumped after regulators in the United States gave the green light to higher dividends and buybacks, whilst the hint of a shift in tone from central bankers towards tightening is spurring hopes of higher interest rates again", ETX Capital analyst Neil Wilson said in a note.

The Federal Reserve today approved the capital plans of 34 large banks participating in the Comprehensive Capital Analysis and Review.

The Fed can reject a bank's capital plan for either reason. Morgan Stanley shares were up 0.3 percent.

As they await this week's stress test results, U.S. banks face a dilemma their European counterparts can only dream of: what to do with a pile of excess cash?

As for scandal-plagued Wells Fargo, Sandler O'Neill's principal Jeffery J. Harte said there's a "fairly high likelihood" the Fed will object to the firm's request for higher capital return.

Goldman Sachs did not give details on its plan to return capital to shareholders.

Powell, the Fed's interim regulatory czar, told Senate lawmakers last week if the country's largest banks continue to meet regulators expectations, it would be "appropriate" to remove the subjective aspect of the yearly test altogether. Our plans also include an increase in our common share repurchase authorization. The Wall Street Journal first pointed out the potential change Wednesday.

USA stock index futures were little changed on Thursday, a day after the benchmark S&P 500 index scored its biggest one-day percentage gain in about two months, as investors awaited GDP and jobs data. Analysts expect financial firms will benefit the most from the Trump administration's proposed tax reform and deregulation, as well as the Fed's plans to raise interest rates.

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