Following its annual "stress tests" for the 17 largest U.S. bank holding companies, the Fed in March conducted its annual Comprehensive Analysis and Review (CCAR) for the same group of banks. The tests are designed to assess the banks' plans to deploy excess capital through dividend increases, share buybacks or through acquisitions.
The Fed rejected plans from Ally Financial and BB&T (BBT) while granting approval to all other submitted plans. BB&T's revised capital plan was later approved by the Fed but included no dividend increase or share buybacks through the first quarter of 2014.
For JPMorgan and Goldman, the Fed granted "conditional approval" of capital deployment plans while requiring the banks to submit revised plans by the end of the third quarter, to "address weaknesses in their capital planning processes." JPMorgan was able to increase its dividend during the second quarter to 38 cents from 30 cents, while also in March receiving the green light from the Fed for up to $6 billion in common-share buybacks through the first quarter of 2014.
JPMorgan CEO James Dimon in a press release on Monday said, "We are pleased that the Fed determined that our CCAR process improvements met their expectations," said Jamie Dimon, Chairman and CEO of JPMorgan Chase," adding he was "grateful to the hundreds of employees who worked tirelessly on our resubmission."
Those comments are interesting because Dimon made a point of focusing on the "resubmission" to the Federal Reserve and all the work that was required to accomplish it but made no mention of any "weaknesses" (to us the Fed's word from March) in the firm's capital planning.
Unlike most of the banks that went through the CCAR process in March, Goldman Sachs provided no details on how much excess capital it was approved by the Federal Reserve to deploy. The company during the third quarter raised its dividend by a nickel to 55 cents a share. The company repurchased $1.65 billion in common shares during the third quarter, following $1.60 billion in buybacks during the second quarter.
Following JPMorgan's third-quarter net loss, reflecting $9.15 billion in provisions for litigation reserves, followed by its JPM's landmark $13 billion settlement with the Department of Justice and other government authorities announced on Nov. 19, investors are looking ahead to a particularly fascinating round of stress tests and CCAR in March 2014. Please see TheStreet's 2014 Stress Tests Bring More Complications for Big Banks for much more on what to expect in March.
Shares of JPMorgan Chase were down 0.4% on Monday to close at $56.98, while Goldman was up 0.5% to close at $169.72. The following chart highlights the strong performance for both stocks this year, as well as for the KBW Bank Index (I:BKX) and the S&P 500
data by YCharts
-- Written by Philip van Doorn in Jupiter, Fla.
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