JPMorgan Chase (JPM) over the past two years hasn't been able to complete its share repurchases because of the "London Whale" hedge trading losses in 2012 that led to over $6 billion in pretax losses and because of the company's expensive mortgage-backed securities settlements during 2013. JPMorgan late Wednesday announced it would repurchase up to $6.5 billion in common shares from the second quarter of 2014 through the first quarter of 2015, and would raise its quarterly dividend to 40 cents from 38 cents.
Sterne Agee analyst Todd Hagerman in a note to clients Thursday called JPMorgan "the clear-cut winner among the multinationals." JPMorgan's stock was up slightly in morning trading to $59.97.
The big winners among regional banks, according to Hagerman, were PNC Financial Services Group (PNC) of Pittsburgh and SunTrust (STI) of Atlanta, "with sizable increases in their respective share repurchase authorizations."
PNC announced a plan to increase its quarterly dividend by an unspecified amount, and also said it would repurchase up to $1.5 billion in common shares from the second quarter of 2014 through the first quarter of 2015. That's a major increase from estimated gross repurchases of $249.1 million from the second quarter of 2013 through the first quarter of 2014, according to KBW.
PNC's shares were down 0.2% in morning trading to $85.15.
SunTrust was approved to raise its quarterly dividend to 20 cents from 10 cents, and to buy back up to $450 million in common shares from the second quarter of 2014 through the first quarter of 2014. According to KBW, SunTrust completed $286 million in buybacks during the prior-year period.
SunTrust's shares were down 0.7% in morning trading to $39.30.
Another winner from DFAST and CCAR is Discover Financial Services (DFS), which was among the 12 companies added to the stress-test group this year. Discover was alone among the banks in announcing last week that it had requested Fed approval to buy back up to $1.6 billion in common shares and to raise its quarterly dividend to 24 cents from 20 cents. The company's capital plan was approved.
According to data compiled by KBW, Discover and State Street STT of Boston were the only two banks subject to this year's stress tests that completed net share buybacks sufficient to lower their common-share counts by 5% in 2012 and in 2013. Discover seems likely to continue the streak, since its planned buybacks exceed its estimated $1.334 billion in net buybacks completed from the second quarter of 2013 through the first quarter of 2014.
This type of share count reduction is significant, because it raises earnings-per-share and supports a higher stock price. "We continue to believe the company has enough excess capital to sustain a high payout ratio and still meet the minimum regulatory capital requirement," Janney Capital Markets analyst Sameer Gokhale wrote in a note to clients Thursday.
Discover's shares were up 0.6% in morning trading to $57.06.