Fiscal Cliff Won't Stop Capital Return
The Federal Reserve will begin its next round of annual stress tests in February, and in March will hand down its decisions on whether or not to approve large bank's plans to return capital to investors through dividend increases and share repurchases.
- Bank of America is currently paying a nominal quarterly dividend of a penny, and the bank didn't request permission from the Federal Reserve to raise the dividend or buy back shares during 2012. Guggenheim Securities analyst Marty Mosby in a report on Dec. 19 estimated that Bank of America would be approved by the Fed to raise the quarterly dividend to a nickel, but did not predict any share buybacks during 2013.
- JPMorgan Chase pays a quarterly dividend of 30 cents, for a yield of 2.73%, based on Wednesday's closing share price of $43.96. The company was approved in March to repurchase $12 billion in common shares through the end of 2012, followed by another $3 billion in the first quarter of 2012. After suspending the buybacks in May because of trading losses by its Chief investment Office, JPMorgan announced that in November that the company would resume buybacks in the first quarter of 2013, repurchasing up to $3 billion in shares. Following the 2013 stress tests, Mosby expects the company to be approved to raise the quarterly dividend to 40 cents and buy back up to $11.6 billion in shares.
- Citigroup is currently paying a quarterly dividend of just a penny a share. The company's initial 2012 capital plan included a dividend increase and share buybacks, but was rejected by the Federal Reserve. The company's subsequent capital plan was approved in August, but didn't include a request to return additional capital to shareholders. Mosby estimates that following the next round of stress tests, the company be approved to raise the quarterly dividend quite significantly to 25 cents, but for the company to hold off on buybacks in 2013.
- Wells Fargo is paying a quarterly dividend of 22 cents, for a yield of 2.56%, based on Wednesday's closing price of $34.33. Mosby estimates that the company will be approved to raise the quarterly dividend to 30 cents, and for Wells Fargo to repurchase $9.9 billion worth of shares in 2013, after buying back an estimated $4.7 billion in 2012.
Email. Follow @PhilipvanDoorn