The Fed’s annual stress tests were introduced following the 2008-09 financial crisis.
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Morgan Stanley , Goldman Sachs , Wells Fargo , and Bank of America said they would raise their dividends after the Federal Reserve gave the banks a clean bill of health in its annual stress test, saying they could withstand a severe economic recession.
Goldman Sachs (ticker: GS) said it would increase its dividend to $2.50 a share from $2. “We will continue to dynamically manage capital and remain well positioned to support our clients,” Chief Executive David Solomon said in a regulatory filing on Monday.
Morgan Stanley (MS) said it plans to increase its shareholder payout by 11% to 77.5 cents ashare, and approved a share buyback program of $20 billion, according to a statement.
Bank of America (BAC) increased its quarterly dividend to 22 cents a share, while Wells Fargo (WFC) boosted its dividend to 30 cents a share from 25 cents.
Shares in Goldman Sachs rose 1.4% in premarket trading on Tuesday. Morgan Stanley stock gained 3.8%, Bank of America rose 0.8%, and Wells Fargo shares were up 1.52%.
JPMorgan & Chase (JPM) said it intends to maintain its dividend of $1 a share for the third quarter in light of “higher future capital requirements.” Citigroup (C) said it has the capacity to maintain its dividend of 51 cents “in a range of stress scenarios.”
The Fed on Thursday released the results of its annual bank stress test, which this year measured the ability of more than 30 of the country’s biggest banks to maintain strong capital levels in a hypothetical severe global recession, which included rising unemployment, commercial real-estate prices dropping and a sharp decline in stock prices.
“All banks tested remained above their minimum capital requirements, despite total projected losses of $612 billion,” the Fed said in a statement. The banks’ capital ratios — which provide a cushion against losses — would decline to 9.7%, more than double their minimum requirements, the Fed said.
Write to Lina Saigol at [email protected]
