US banks have hiked dividends – Fed stress tests cleared

Following the clearance received after Fed’s stress test in the previous week, top US banks, including Morgan Stanley, JPMorgan, Bank of America, Goldman Sachs, and Wells Fargo, are poised to increase their capital payouts.

Being that the Fed also removed COVID-motivated roadblocks that limited capital payouts, initial forecasts by investors and industry experts predicted issuance of dividends and stock buybacks to rise as high as US$130 billion from July.

However, Morgan Stanley shocked investors, when it announced that it would be doubling its dividend to 70 US cents per share in the third quarter of 2021, while also promising to spend more on buybacks. Some of the highest predictions prior to this announcement put the increase at 50%.

Morgan Stanley chief executive James Gorman stated in the announcement that this decision “reflects a decision to reset our capital base consistent with the needs we have for our transformed business model”.

Also targeting the third quarter of 2021 implementation, Bank of America Corp has said it will increase its dividend by 17% to 21 cents per share beginning in the third quarter 2021, while JPMorgan Chase & Co said it will increase dividends from 90cents to US$1 per share.