Story updated to reflect Federal Reserve announcement.
NEW YORK (TheStreet) -- Several regional banks could announce dividend boosts shortly after Federal Reserve completed its second round of stress tests Friday.
"We expect an announcement that the tests have been completed--followed by announced capital actions by several banks," according to a report by Deutsche Bank (DB) analyst Matt O'Connor. The second round of stress tests come to an end on Friday with the Federal Reserve saying "some firms are expected to increase or restart dividend payments, buy back shares, or repay government capital."
"Of the banks we cover, we expect dividend boosts at BB&T (BBT), JPMorgan (JPM), PNC Financial (PNC), US Bancorp (USB) and Wells Fargo (WFC) and common/preferred buyback announcements at each of these banks (except for at BBT--which has a higher dividend payout ratio/yield). Including buybacks and dividends, we expect capital deployment to be 30-40% of 2011 earnings."KBW analysts added that of the 16 banks in the stress tests, they believe that Capital One (COF), JPMorgan, Fifth Third Bank (FITB), PNC Financial, US Bancorp, and Wells Fargo will receive approval to increase their dividend. "We think that approvals for either PNC and FITB would come as positive surprises. We believe there is market skepticism related to PNC's ability to receive approval for a dividend increase due partly to confusion about h capital treatments of its BLK position under Basel III," said KBW analysts David Konrad and Frederick Cannon in a report. Both analyst firms believe that Bank of America (BAC), Citigroup (C) and Morgan Stanley's (MS) dividend increases will be delayed. Here's a breakdown of the range of dividend increases analysts predict by bank according to KBW and Deutsche Bank:
- JPMorgan Chase could see a quarterly dividend increase to 25 cents from five cents a share, according to KBW. Deutsche Bank predicts that shareholders will see an annual dividend raise from 20 cents to 80 cents.
- PNC could increase its dividend to 35 cents from 10 cents per share, according to KBW. Deutsche Bank predicts that shareholders could see an annual dividend raise from 40 cents to $1.00 a share.
- Fifth Third could increase its quarterly dividend to nine cents from a penny, according to KBW. Deutsche Bank predicts that shareholders could see an annual raise from four cents to 25 cents a share.
- US Bancorp could increase its dividend to 15 cents from five cents a share, according to KBW. Deutsche Bank predicts that shareholders could see an annual raise from 20 cents to 48 cents a share.
- Wells Fargo could increase its dividend to six cents a share from five cents a share, according to KBW. Deutsche Bank predicts that shareholder could see an annual raise from 20 cents to 48 cents a share.
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