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Big Banks and the Fed: Capital Return Preview

Wells Fargo currently pays a quarterly dividend of 22 cents a share, for a yield of 2.40%, based on Tuesday's closing price of $36.66. "Given its strong earnings track record, small Basel III deficit and solid cushion in stress tests," Staite estimates the company will raise the dividend to 27 cents and be approved for $5.0 billion in share buybacks during 2013, for a total capital return of $10.4 billion, or 53% of estimated 2013 earnings.

Here's a summary of what investors might expect other large banks to announce after Thursday's market close:

  • JPMorgan Chase pays a quarterly dividend of 30 cents a share, for a yield of 2.39%, based on Tuesday's closing price of $50.28. The company in March 2012 was approved for $15 billion in share repurchases through the first quarter of 2013, but suspended the buybacks after CEO James Dimon last May announced large hedge trading losses in the firm's Chief Investment Office. Staite expects JPMorgan to be approved for an increase in the dividend to 35 cents, and for $7.5 billion in buybacks this year, for a total capital return $11.9 billion, or 61% of estimated earnings. Credit Suisse analyst Moshe Orenbuch has a rosier view, estimating on March 5 that JPMorgan would be approved to raise the quarterly dividend to 36 cents and to be approved for $5.4 billion in buybacks for 2013, for a total capital return of $14.9 billion, or 71% of earnings.
  • Bank of America is paying a nominal dividend of 1 cent a share. The company requested no dividend increase or share buybacks last year. For 2013, Staite is expecting the quarterly dividend to be raised to 5 cents and for the company to be approved for $3.0 billion in buybacks. These would make a total capital return of $2.4 billion, or 39% of estimated earnings. Orenbuch estimated a much smaller capital return of $1.6 billion for 2013, or 14% of earnings, with the quarterly dividend going up to 2 cents and $753 million in buybacks.
  • PNC Financial Services Group (PNC) of Pittsburgh pays a quarterly dividend of 40 cents, for a yield of 2.45%, based on Tuesday's closing price of $65.42. Staite estimates the bank will raise the dividend to 45 cents, with no share buybacks this year. That would make for a capital return of roughly $800 million, or 27% of estimated earnings.
  • U.S. Bancorp (USB) of Minneapolis is the other earnings star among the 18 banks subjected to CCAR, with returns on average assets rising from 0.82% in 2009 to 1.65% in 2012. The bank is currently paying a quarterly dividend of 19.5 cents a share, for a yield of 2.27%, based on Tuesday's closing price of $34.34. Staite expects USB to raise the quarterly dividend to 22 cents, and to be approved for $3.0 billion in buybacks this year, for a total capital return of $4.3 billion, or 77% of earnings.
  • Goldman Sachs (GS) pays a quarterly dividend of 50 cents, for a yield of 1.32%, based on Tuesday's closing price of $151.85. Staite expects no dividend increase, but does expect the company to be approved for $6.0 billion in buybacks, for a total capital return of $6.9 billion, or 104% of earnings.
  • Morgan Stanley (MS) currently pays a quarterly dividend of 5 cents a share, for a yield of 0.88%, based on Tuesday's closing price of $22.67. Staite expects no dividend increase or any buybacks for 2013.

Please see 'Rich to Get Richer' from 2013 Stress Tests: Credit Suisse for more estimates for capital returns among large regional banks.

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Stock quotes in this article: BAC, C, JPM, WFC, USB, GS, MS, PNC 
Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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