The Only Capital One
-By Sam B | [email protected]
The Federal Reserve released its stress on June 28 with all 34 banks passed the test. However, certain banks came within striking distance of breaching the supplementary leverage ratio (SLR), the contentious ratio that requires banks to hold tier 1 capital relative to their total leverage exposure. This includes, on balance sheet assets, derivative exposures, repo style transactions and other off balance sheet items. Jamie Dimon the CEO of Jean Pierpont Morgan said this regarding the SLR in the company's 2016 annual report "These calculations should, at a minimum, be significantly modified and balanced to promote lending and other policy goals, including maintaining deep and liquid capital markets, clearing derivatives and directing more private capital in the mortgage market."
Banks, also, announced dividend and buybacks plans on June 28 after the Fed published the second round of stress test results.
Here is a list of some of the major dividend changes by some notable US Banks:
Capital One Financial discussed at the end is the notable exception.
SunTrust raised its dividend to 40 cents a share and authorized a buyback of $1.32 billion buyback.
Regions Financial raised its dividend to 9 cents and authorized a buyback up to $1.47 billion in repurchases.
Discover Financial Services raised its dividend to $0.35 per share of common stock and authorized a buyback up to $2.23 billion.
Bank of America raised its dividend 60% to 12 cents a share and will buyback up to $12 billion worth of common stock.
J.P. Morgan raised its dividend 6 cents to 56 cents a share and authorized a buyback of $19.4 billion.
Wells Fargo raised its dividend 1 cent to 39 cents a share and authorized a buyback of $11.5 billion.
PNC Financial Services Group raised its dividend by 20 cents and authorized to repurchased $2.7 Billion of stock.
Citigroup doubled its dividend to 32 cents a share and authorized a repurchase of $15.6 billion.
U.S. Bancorp raised its dividend to 30 cents per share and authorized a repurchase of $2.6 B.
Fifth Third Bank raised its dividend to 16 cents from 14 and authorized a share repurchase plan.
Capital One Financial announced the Fed did not object to COF's proposed plan but it is requiring the company to resubmit its capital plan by December 28, 2017 to address certain weaknesses in its capital planning process. If the Federal Reserve Board objects to the resubmitted capital plan, it may restrict subsequent capital distributions. COF maintained its dividend of 40 cents and authorized to repurchase up to $1.85 billion of shares of the company's common stock beginning in the third quarter of 2017 through the end of the second quarter of 2018. Last year, COF announced a buyback of $2.5 billion and a dividend of forty cents.
Some analysts were highly critical of the Fed's decision. Yalman Onaran of Bloomberg News said "this is the qualitative portion of the test." He said its "vague in what they find fault in" and speculated COF needs to look at the risks of its credit card business better." He compared COF to last year's Morgan Stanley, which conditionally passed and had to resubmit a plan in December 2016. He added: "the revised plan isn't about number it's about a qualitative portion that for whatever reason the Fed was not happy about."