The San Francisco-based bank said it will cut its dividend, breaking rank with all of Wall Street’s other big banks, following the Federal Reserve’s move to set new restrictions on dividend payouts to shareholders.
The fourth-biggest U.S. bank by assets announced it plans to cut its dividend from the 51 cents it paid in each of the four most-recent quarters. The bank said it would announce its payout when it reports second-quarter earnings on July 14.
The move marks the first time since the financial crisis that a major U.S. bank has slashed its quarterly reward to shareholders, though it also comes as the Fed literally backstops banks and other lenders with almost free money to keep cash flowing through the economy amid the coronavirus pandemic and ensuing economic collapse.
In releasing the results of its annual stress test on the industry last week, the Fed capped dividends at the largest 33 banks at current levels to ensure banks continue to preserve their own cash in the event the financial system comes under additional strain.
The Fed has also told companies they can’t resume buybacks, which were suspended in March to preserve capital as the pandemic was spreading.
The central bank said it might conduct another exam using a harsher economic scenario later this year, limiting firms’ ability to gauge prospects for dividends for the rest of the year.
Watch More Videos From TheStreet and Jim Cramer:
- Coronavirus Update: Powell and Mnuchin to Testify In Front of U.S. Lawmakers
- What Jim Cramer's Watching Ahead of July 4
- Jim Cramer: Why President Trump Needs to Wear Mask
- Jim Cramer: Common Stock of Bankrupt Companies Is Worthless
- Jim Cramer: Everything Is Collapsing for Disney
- Jim Cramer: Advice for Investors Learning About the Stock Market
- TheStreet Explains: What is Day Trading and How Has it Impacted Stocks?
- TheStreet Explains: What Are the Biggest Political Risks to Stocks?