What may be confusing for investors in this year's stress test process is the Federal Reserve's decision to hold off on announcing its decision about planned capital actions by banks until March 14. The Comprehensive Analysis and Review (CCAR) applies the stress test scenarios to banks' capital plans, meaning that investors have to wait another week until the banks announce dividend increases and/or plans to buy back shares through the first quarter of 2014.
However, Citigroup said late Thursday that it did not ask for a dividend increase but did ask for a $1.2 billion buyback. Citigroup's capital return request was denied last year. The bank had said that it would be conservative in its request this time around.
Analysts have been bullish about banks' ability to return capital following the stress tests. Credit Suisse analyst Moshe Orenbuch in a report on Wednesday estimated that the 17 banks subject to CCAR covered by his firm will increase their total capital return to 64% of earnings from 36% in 2012, "with a median dividend payout ratio of 24% versus 21% in 2012."
-- Written by Shanthi Bharatwaj and Philip van Doorn.