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Big Banks: Capital Deployment Winners and Losers

Stocks in this article: BAC JPM WFC RF STI COF STT GS ZION BBT

Wells Fargo (WFC) raised its quarterly dividend to 30 cents a share from 25 cents and said it had received Federal Reserve approval for "a proposed increase in common stock repurchase activity for 2013 compared with 2012," when the company's share repurchases totaled $4.0 billion. Mutascio was "surprised" at the dividend increase, since the bank had raised the dividend by 3 cents in January. "As a result, the company's dividend yield of 3.2% will be the highest in our large-cap coverage universe," he wrote. Wells Fargo's shares were up 2% in early trading, to $37.57.


While the two banks aren't really "losers," in that their capital plans were not rejected outright by the Federal Reserve, JPMorgan Chase (JPM) and Goldman Sachs (GS) both received "conditional" approvals of their capital plans by the Federal Reserve. That can be perceived as a negative for both companies, but especially for JPMorgan Chase, which is feeling the heat from the Senate Committee on Investigations, led by Senator Carl Levin (D., Mich.), which is holding a hearing Friday on the company's " London Whale" hedge trading losses first announced last May.

Despite having to resubmit its capital plan, JPMorgan announced an increase in its quarterly dividend to 38 cents a share from 30 cents, and said it would repurchase up to $6.0 billion in shares through the first quarter of 2014. JPMorgan's shares were down over 3% in early trading, to $49.31.

Goldman Sachs CEO Lloyd Blankfein said in a statement the firm was "pleased to continue to have the flexibility to return capital to shareholders," but the company released no further details on its capital plan. Goldman's shares were down 1% in early trading, to $152.83.

While Ally Financial and BB&T had their capital plans rejected outright, the Fed partially objected to the capital plan submitted by Zions Bancorporation (ZION) of Salt Lake City. The company announced that the regulator "to certain proposed capital actions, it did not object to key capital actions relating to the reduction of the cost and quantity of Zions' non-common capital." The company was approved to repurchase $600 million in preferred and trust preferred securities and said it could request permission to redeem another $200 million in preferred stock in its revised capital plan.

Jefferies analyst Ken Usdin said in a report late on Thursday that "ZION's quarterly dividend appears to stay at $0.01." Shares of Zions Bancorporation were down 2% in early trading, to $25.32.

SunTrust (STI) of Atlanta said it would increase its dividend to 26 cents a share from 24 cents and buy back up to $2.1 billion in common shares. The dividend increase "came in below our estimate of an $0.08 dividend increase (to $0.13), while buybacks of $150 million were below our estimate of $274 million," Mutascio wrote, adding that "as a result, the overall payout of 25.8% came in below our estimate of 38.3%." SunTrust's shares were down 2% in early trading, to $29.15.

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

>Contact by Email.

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 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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