JPMorgan, Bank of America, Citi and Goldman maintain dividends post-stress tests, Wells Fargo to cut

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(L-R) Michael Corbat, chief executive officer of Citigroup Inc., Jamie Dimon, chief executive officer of JPMorgan Chase & Co., James Gorman, chief executive officer of Morgan Stanley, Brian Moynihan, chief executive officer of Bank of America Corp., Ron O’Hanley, president and chief executive officer of State Street Corp., Charles Scharf, chief executive officer of Bank of New York Mellon Corp., and David Solomon, chief executive officer of Goldman Sachs & Co., are sworn in before a House Financial Services Committee hearing on April 10, 2019 in Washington, DC.

Alex Wroblewski | Getty Images

Nearly all of the largest U.S. banks said Monday that they performed well enough on the Federal Reserve’s most-recent stress test to allow each bank to maintain their quarterly dividend.

Goldman Sachs, Bank of America, Morgan Stanley, and Citigroup all said they will maintain their current dividend. Wells Fargo, however, said the Fed’s assessment of its business will warrant a reduction to its quarterly payout.

While the nation’s largest banks were quick to drop stock buybacks at the onset of the coronavirus pandemic, the group is often loathe to cut their dividend payments, which are viewed as a steady source of income for investors. The industry was forced to slash dividends after the 2008 financial crisis and has only slowly built them up since the Fed first allowed banks to raise dividends in 2011.

But given the unprecedented stress Covid-19 has put on the American economy, the Fed last week announced new restrictions on the U.S. banking industry.

In an effort to guarantee the continued survival of the banks and ensure adequate capital in the system, the Fed said it is capping dividend payments in the third quarter. The regulator said third-quarter bank dividends will be capped at the amount paid in the second quarter and that it may choose to reduce the payouts further based on each firm’s recent earnings.

Fed officials, citing an abundance of caution, also barred the banks from buying back shares in the third quarter and said it will require banks to submit to ongoing quarterly reviews for the duration of the crisis. Most of the nation’s largest banks already agreed to halt share repurchases during the second quarter to shore up their capital positions.

Here’s what Goldman Sachs, Bank of America, Wells Fargo, Citigroup and Morgan Stanley said:

Goldman Sachs

  • Per-share dividend for quarter ended March 31: $1.25
  • New dividend: $1.25
  • Notable commentary:”Our durable earnings profile, continued performance, and highly liquid balance sheet allow us to serve our clients, maintain our dividend, and deliver for all our stakeholders,” said Chairman and CEO David Solomon. “We have a track record of rebuilding capital when necessary, and have brought our standardized CET1 ratio above 13% as this quarter comes to a close. We fully intend to continue this dynamic capital management while helping our clients continue to navigate challenging markets.”

Citigroup

  • Per-share dividend for quarter ended March 31: 51 cents
  • New dividend: 51 cents
  • Notable commentary: “While we will continue to evaluate our planned capital actions relative to the most recent financial and macroeconomic conditions, we believe we are well positioned to continue to support our customers and the broader economy, while also continuing with our planned capital actions,” said CEO Michael Corbat. “The planned capital actions include common dividends of $0.51 per share in the third quarter and over the four quarters covered by the 2020 CCAR cycle (i.e., 4Q 2020 – 3Q 2021), subject to the latest financial and macroeconomic conditions.”

Morgan Stanley

  • Per-share dividend for quarter ended March 31: 35 cents
  • New dividend: 35 cents
  • Notable commentary: The results “affirm our strong capital position and reflect the stability of our business model. … We anticipate continuing to pay our quarterly common stock dividend of $0.35 per share,” said CEO James Gorman. “We voluntarily suspended our share repurchases in March and have continued to accrete capital. The updated capital rules provide us flexibility to deploy our excess capital, and we will reevaluate our capital actions when we have more confidence in the shape and path of the economic recovery.”

Wells Fargo

  • Per-share dividend for quarter ended March 31: 51 cents
  • New dividend: Reduced. Exact payout to be determined.
  • Notable commentary: “We expect our second quarter results will include an increase in the allowance for credit losses substantially higher than the increase in the first quarter,” said CEO Charlie Scharf. “Wells Fargo continues to have one of the strongest capital positions relative to regulatory minimums among the world’s financial services firms as demonstrated by our stress test results. These are certainly extremely challenging times for many and we remain committed to supporting our customers and communities, and we will continue to take appropriate measures to maintain strong capital and liquidity levels and to improve the earnings capacity of the company.”

Bank of America

  • Per-share dividend for quarter ended March 31: 18 cents
  • New dividend: 18 cents
  • Notable commentary: “Bank of America is committed to returning capital to shareholders over time, in excess of what is needed across economic cycles to grow the company and support clients, communities and the global economy. The company intends to maintain the quarterly common stock dividend at the current rate of $0.18 until further notice, subject to approval by Bank of America’s Board of Directors. 

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