Banking, finance, and taxes

2019 Fed CCAR Gift to Warren Buffett: Dividend Hikes and Buybacks Galore for All Major Banks

Jon C. Ogg

Published: June 27, 2019 5:30 pm

Last Updated: January 30, 2020 7:08 pm

At the end of June, the Federal Reserve now releases its annual Comprehensive Capital Analysis and Review (CCAR). This exercise includes a quantitative assessment for the top banks that operate in the United States and is effectively the stress test that banks must pass in order to increase their dividends and to buy back more stock. It turns out that almost all the firms passed with flying colors.

24/7 Wall St. has tracked the major banking announcements showing proposed dividend hikes and new share buyback announcements. It is important to understand that some of these buybacks and dividends might have been previously announced and that these effective confirm the releases.

The main portion of what matters here is this sentence from the executive summary: “No firms were objected to on quantitative or qualitative grounds in CCAR 2019.” The dividends and buybacks cover a rolling four-quarter period, from July 1, 2019, to June 30, 2020.

Many top banks have announced dividend hikes and increased stock buybacks, and some are simply confirming what already was being paid out. 24/7 Wall St. has taken data from the press releases and consolidated the data to keep everything concise.

While some financial institutions have not been covered in the review below, the aim here was to cover the top banks in America.

Bank of America Corp. (NYSE: BAC) said that its board of directors approved plans for the company to return as much as $37 billion to common stockholders over the next four quarters in dividends and common stock repurchases. The bank plans to increase its quarterly common dividend per share by 20% to $0.18 per share. It also has been authorized to repurchase roughly $30.9 billion in its common shares, and it would include approximately $0.9 billion in repurchases to offset shares awarded under employee stock options during the same period.

Bank of New York Mellon Corp. (NYSE: BK) approved the repurchase of up to $3.94 billion of its common stock for the four-quarter period, an increase of approximately 20% versus the prior four-quarter period. BNY Mellon also intends to increase its quarterly cash dividend by roughly 11% — from $0.28 to $0.31 per common share.

Capital One Financial Corporation (NYSE: COF) did not receive objections to its adjusted capital plan. The company expects to maintain its quarterly dividend of $0.40 per common share and its board of directors has authorized the repurchase of up to $2.2 billion worth of common stock.

Citigroup, Inc. (NYSE: C) received no objection to its planned capital actions. These included increasing the common stock dividend from $0.45 to $0.51 per share and a common stock repurchase program of up to $17.1 billion.

Fifth Third Bancorp (NASDAQ: FITB) has a capital distribution projection which includes the ability to distribute approximately $2 billion in capital through common share repurchases and by increasing its per-share common dividend.

Goldman Sachs Group Inc. (NYSE: GS) did not receive objections to its CCAR 2019 capital plan. These include up to $8.8 billion of capital returns over the four-quarter period, and that includes up to $7.0 billion in common stock repurchases and a dividend hike on the common shares from $0.85 to $1.25 per share.

JPMorgan Chase & Co. (NYSE: JPM) confirmed that the Federal Reserve Board did not object to its capital plan for 2019. J.P. Morgan Chase’s board intends to increase the quarterly common stock dividend to $0.90 per share from the current $0.80 payout per share. It further authorized gross repurchases of up to $29.4 billion in the four-quarter period for new common equity repurchases.

Morgan Stanley (NYSE: MS) received no objection to its 2019 Capital Plan which includes the repurchase of up to $6.0 billion of outstanding common shares for the four-quarter period — an increase from $4.7 billion for the comparable four-quarter period in the 2018 Capital Plan. Morgan Stanley also will raise its quarterly common stock dividend to $0.35 per share from the current $0.30 per share.

State Street Corp. (NYSE: STT) was approved to increase its dividend and a new common stock purchase program. State Street’s capital plan proposes an increase to the quarterly dividend to $0.52 per share from $0.47 per share on the common stock. Additionally, its board has approved a new common stock purchase program of up to $2.0 billion.

U.S. Bancorp (NYSE: USB) will recommend in July that its board of directors approve a quarterly dividend increase to $0.42 per common share (up 13.5%) and this is expected to increase the annual dividend equivalent to $1.68 per common share. It has also approved a four-quarter authorization to repurchase up to $3.0 billion of its common stock.

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Wells Fargo & Co. (NYSE: WFC) expects to increase its third-quarter dividend to $0.51 per common share from $0.45 per share. The plan also includes common stock repurchases of up to $23.1 billion for the four-quarter period under the plan. In addition, Wells Fargo’s board of directors may consider redemptions or repurchases of other capital securities as part of the plan.

The Board of Governors of the Federal Reserve System did issue a conditional non-objection to Credit Suisse Holdings (USA) of Credit Suisse Group A.G. (NYSE: CS) capital plan. The Fed is requiring Credit Suisse to address weaknesses in its capital adequacy process by October 27, 2019.

Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-A) own many of the common shares listed above. Buffett and his team have communicated that they would unload more shares if the 10% ownership threshold is going to be breached, but there is a movement that may allow more of the banks to have larger shareholders than 10%, if the shareholders are passive and are not in a position of control or direct influence over the bank’s operations or board of directors.