American Express Company (NYSE: AXP) said today that the Board of Governors of the Federal Reserve System did not object to its 2013 capital plan to increase the Company’s quarterly dividend to 23 cents per share, to repurchase up to $3.2 billion of common shares during the last three quarters of 2013 and to repurchase up to an additional $1.0 billion in the first quarter of 2014. The Company also said that it expects to repurchase approximately $800 million of common shares during the first quarter of 2013 under the Company’s 2012 capital plan.
The dividend increase would amount to 3 cents per share, or 15 percent. The share repurchases in 2013 would be in line with the amounts that were actually repurchased last year under the 2012 capital plan. Dividends and share repurchases are subject to approval by the Company’s board of directors.
As indicated in the Federal Reserve report issued earlier today, the 2013 capital plan would generate a minimum Tier 1 common ratio of 6.42 percent under the Federal Reserve’s “severely adverse stress scenario” during the nine-quarter forecasting period through the fourth quarter of 2014.
The 2013 capital plan revises an initial plan that was submitted to the Federal Reserve by American Express in January of this year. The initial plan had included a quarterly dividend of 23 cents, share repurchases of up to $4.7 billion during the last three quarters of 2013 and up to $1 billion in the first quarter of next year.The Company prepared the initial plan using the Federal Reserve’s severe stress scenario, and basing it on the Company’s own internal analysis of operating performance. This internal analysis yielded a minimum Tier 1 common ratio of 9.2 percent during the forecasting period, above the 5 percent minimum threshold established by the Federal Reserve. However, the Federal Reserve, using its own models and analysis, concluded that the Company’s initial plan would have generated capital ratios below the minimum thresholds for at least one quarter during the nine-quarter forecasting period. Under the Federal Reserve’s guidelines, and as indicated in the Federal Reserve report issued earlier today, the Company revised and resubmitted its plan.