Five of the nation's largest financial firms – Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo – announced their intention to raise the price of their common stock dividends following the U.S. Federal Reserve's approval of their respective capital plans.
On Wednesday, the Fed announced it approved of the capital plans of 28 out of the 31 companies that participated in its recently-conducted Comprehensive Capital Analysis and Review. The review was a test of the strength of the capital planning process of the financial institutions, as well to determine if the projected capital ratios of the firms could withstand a hypothetical scenario of severe economic stress. The Fed approved the capital plans of 28 of the institutions tested.
"Our capital plan review helps ensure that the capital distribution plans of large banks will not compromise their ability to continue lending to businesses and households even during a period of serious financial stress," Federal Reserve Governor Daniel K. Tarullo said. "It also provides a structured assessment of their risk management capacities."
Citigroup plans to increase the price of its common stock dividends up to $0.05 per share and initiate a common stock repurchase program for up to $7.8 billion.
"We are committed to delivering meaningful returns of capital to our shareholders and today’s decision will allow us to begin doing so. We have worked very hard over the last twelve months to further strengthen our capital planning process, with the goal of embedding it into the way we run the firm," said Michael Corbat, CEO of Citi. "We are committed to building on the progress we have made and ensuring that we have a sustainable process that serves the financial system as well as our shareholders. We want Citi to be an indisputably safe and sound institution and will do everything in our power to make that the case, year in and year out."
Goldman Sachs announced it would increase the price of its quarterly common stock dividends by 5 cents, up to $0.65 per share, starting in the second quarter of this year, pending approval from the firm's Board of Directors.
"We remain focused on managing our resources dynamically, growing our client franchise, and generating superior returns for our shareholders while remaining well capitalized," Goldman Sachs CEO Lloyd Blankfein said.
JPMorgan Chase intends to increase the price of its dividends from $0.40 up to $0.44 per share. The firm's Board of Directors also authorized the repurchase of up to $6.4 billion worth of common equity stock.
"We are pleased that our Board intends to raise the dividend and continue our equity buyback program," Jamie Dimon, Chairman and CEO of JPMorgan Chase, said.
Meanwhile, Morgan Stanley announced a common stock repurchase program for up to $3.1 billion of common stock, and the investment firm intends to raise its quarterly common stock dividend by 5 cents up to $0.15.
"The successful repositioning of the Firm and our ability to generate more consistent earnings enables us to increase both our dividend and share repurchase for the second consecutive year," said James Gorman, Chairman and CEO of Morgan Stanley. "Today’s actions reflect the hard work of our employees over the last several years as we have been executing our strategic priorities.”
Wells Fargo intends to raise the price of its dividends by 7 cents, up to $0.42 per share.
"We are pleased to receive the Federal Reserve Board’s non-objection to our capital plan to increase our common stock dividend and continue our strong share repurchase activity," Wells Fargo Chairman and CEO John Stumpf said. "This result again demonstrates the benefit of our diversified business model and conservative risk discipline, which have positioned us well to return capital to shareholders within our targeted range while maintaining strong capital levels."
While the Fed did not object to Bank of America's capital plan, the central bank requested that Bank of America sent a revised plan by the end of the third quarter (September 30) in order to address weaknesses discovered in the capital planning process. The Fed rejected the capital plan of two banks, Deutsche Bank and Santander Holdings.
All dividend price increases would be effective starting with the second quarter of 2015. All common stock repurchase programs cover the period starting with the second quarter of 2015 and ending with the second quarter of 2016.