JPMorgan Chase leads the way: major U.S. banks start paying dividends after passing stress tests

After passing the Federal Reserve's annual stress test, large U.S. banks collectively increased their dividends and initiated buybacks, returning capital to shareholders on a large scale and continuing the increasingly active trend of dividend payouts in recent years as regulations have loosened. On June 25, according to foreign media reports, after the Federal Reserve announced the results of its annual assessment, JPMorgan Chase, the largest lending institution in the United States, raised its quarterly dividend from $1.50 per share to $1.65 per share and approved a new $50 billion stock buyback plan, effective July 1. Goldman Sachs increased its quarterly dividend from $4.50 to $5. Wells Fargo raised its quarterly dividend from 45 cents to 50 cents, Morgan Stanley from $1 to $1.15, and Citigroup increased its quarterly dividend from 60 cents to 67 cents after board approval. The background of this collective increase in dividends is that the results of this year's stress tests by the Federal Reserve will not affect the capital requirements of the banks. The Federal Reserve voted in February to freeze the current stress capital buffer requirement until 2027 and continue to revise the annual tests to make them more bank-friendly. This means that banks have greater flexibility in their capital return arrangements. As the stress tests become more lenient, the space for capital returns expands. JPMorgan Chase's quarterly dividend increased by approximately 10%, and its $50 billion buyback plan, effective July 1, demonstrates its confidence in its capital strength. Goldman Sachs' dividend increased by approximately 11%. Morgan Stanley's dividend increased by approximately 15% and it also reauthorized a $20 billion multi-year buyback plan. Wells Fargo's dividend increased by approximately 11%. Citigroup's dividend increased by approximately 12%, subject to final board approval. Bank of America stated that it will announce its dividend plan for the next quarter after its July board meeting, and as of the end of March, the bank's stock buyback plan still has nearly $23 billion unused. CEO Brian Moynihan stated in a release, "Todays results show that Bank of America has strong capital strength and will continue to invest in the company while supporting customers and the continued growth of the economy." This round of dividend increases is supported by a solid profit base. According to foreign media reports, the six largest U.S. banks distributed over $140 billion in dividends and share buybacks last year, surpassing the historical record set in 2019. Meanwhile, record trading revenue boosted the combined profits of the six banks to the highest level since 2021. Analysts point out that strong profitability combined with a more lenient regulatory environment provides dual support for this round of large-scale capital returns. The Federal Reserve's stress tests were established after the 2008 financial crisis to assess whether banks can maintain sufficient capital under assumed economic recession scenarios. The results of the tests usually directly determine the extent to which banks can return capital to shareholders through dividends and stock buybacks. However, in recent years, the constraints of these tests have weakened significantly. In February of this year, the Federal Reserve announced that it would freeze the current stress capital buffer requirements until 2027 and continue to revise the annual tests to make them more bank-friendly. Last year, as the rigor of the tests was lower than in previous years, the capital requirements for many banks have decreased. The Federal Reserve stated that since this year's test results do not affect capital requirements, "it is expected that institutions will not need to wait for a specific time to disclose their capital actions through the third quarter of 2027," further opening a window for banks to announce dividends and buyback plans in advance. This article is a repost from Wall Street News; GMTEight edition: Chen Xiaoyi.