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Investors have earned the remuneration of Loser Bank supervision as Wall Street’s biggest bank announced a flood of shareholder payments on Tuesday after it passed a “stress test” of regulations that imposed conditions easier than in the past few years.
JPMorgan, Goldman Sachs, Bank of America and Morgan Stanley have said they will raise quarterly dividend payments to shareholders, while Jpmorgan and Morgan Stanley will buy back billions of dollars worth of shares.
Goldman said it would increase its dividend of 33% to $4 per share. JPMorgan said it would increase its quarterly common stock dividend from $1.40 per share to $1.50 per share in the next quarter. Bank of America said it would increase its quarterly common stock dividends to $0.28 per share from the same quarter.
JPMorgan also said it would allow it to purchase its own shares worth up to $50 billion.
The high payments reflect what analysts and investors see as a more troublesome regulatory environment for banks after more than a decade of tight restrictions in the aftermath of the 2008 financial crisis.
The bank’s stock price has hardly changed since the announcement Tuesday, but it booked recent profits as investors absorbed news of lighter stress testing requirements.
Last week, the Fed confirmed that 22 banks, from the biggest banks, such as JPMorgan and Goldman Sachs, to small players including PNC and BNY, have successfully tested annually to assess the potential and market crises of economic and market crises.
The bank uses the results to calculate the minimum level of capital required for risk-adjusted assets. Capital is used by banks to absorb losses.
This year’s stress test was the first since the Fed relaxed the scenario with a more intense theoretical recession than the previous year. The new test was designed before US President Donald Trump took over the office, but what his administration defended is in line with more looser banking regulations.
Analysts at Morgan Stanley said the Fed’s results were “better than expected” as they flagged methodological changes that led to low virtual losses, including changes in the way regulators measure private equity exposures.
“There’s a new era of banking regulations here,” an analyst at Morgan Stanley wrote in a memo earlier this week.
The Fed said this year’s tests will boost the bank’s total capital ratio of 1, down 1.8 percentage points, a major cushion against losses.
The Fed will be clarifying in the coming weeks whether to use the average of stress test results over the past two years to calculate the bank’s capital requirements.
As part of a broader push to facilitate banking regulations, the Fed and two other watchdogs announced plans last week to reduce the ratio of enhanced supplemental leverage.
