Most big banks pass Fed's stress tests

JPMorgan, Wells Fargo and others raise dividends and announce share buyback plans -- and force the Fed to release results 2 days earlier than expected. Citigroup and 3 others come up short. MetLife disagrees with the exercise.

By Charley Blaine Mar 13, 2012 5:24PM

Updated: 6:50 p.m. ET

Banks announced dividend increases and stock buybacks late today as the Federal Reserve released the results of stress tests designed to see if they have enough capital resources to withstand a major financial crisis.


Fifteen of 19 institutions that the Fed looked at passed its capital requirements. The expectation that the results would show a relatively healthy financial industry provided an extra push to an already-robust stock market rally today. The Dow Jones industrials ($INDU) finished up 218 points to 13,178. 

JPMorgan Chase (JPM) jumped the gun in announcing a 20% dividend increase and a $15 billion share repurchase plan. Shares finished up $2.85 to $43.39 but slipped 39 cents to $43 after hours.

The banking giant's announcement was followed by announcements from US Bancorp (USB), Wells Fargo (WFC) and American Express (AXP).

Wells Fargo now has a 22-cent dividend, up 10 cents from January's 12 cents. US Bancorp raised its annual dividend to 78 cents from 50 cents and will buy back up to 100 million shares.

Wells Fargo was up 17 cents, or 0.5%, to $33.50 after hours. The shares had climbed $1.82 to $33.33. US Bancorp was off 2 cents after hours to $30.99. The shares had risen $1.33 to $31.01 in regular trading. American Express rose 30 cents to $54.55 after hours. The stock had jumped $1.48 to $54.25 in regular trading.

Three banks missed the minimum 5% capital ratio -- Citigroup (C), SunTrust (STI) and Ally Financial, the privately held successor to General Motors Acceptance.

Citigroup had been expected to pass the test and start boosting its dividend, now at a penny a share. It is believed that a huge exposure to mortgages weighed on its test results.

Shares were off $1.18 to $35.28 after rising $2.16 to $36.45. Citigroup released a statement saying it would submit a revised capital plan later this year.

MetLife (MET) missed another measure of capital -- and wasn't happy about it. The insurance giant insisted that the criteria -- it used the phrase "bank-centric" -- were not applicable to insurance companies. MetLife insisted an insurance company is not a bank.

JPMorgan's decision to release its plan for a dividend increase and share buyback was widely seen as CEO Jamie Dimon's thumbing his nose at Fed Chairman Ben Bernanke. Dimon has disagreed loudly with efforts to regulate banks more closely in the wake of the 2008 financial crash.

The stress test asked, in the most extreme case, what would happen to a financial institution's financial condition if there is a severe recession that sends unemployment to 13%, cuts stock prices by 50% and pushes home prices down 21%.

Here is how the stress-test results affected the 19 institutions.

Ally Financial: Supports the Fed's stress tests but has differences with how the Fed looks at the company's mortgage risks, its efforts at cleaning up past problems and contingent capital that already exists. Will submit a new dividend a buyback plan.

American Express: Will spend $4 billion on share repurchases in 2012 and an additional $5 billion in the first quarter of 2013.

Bank of America (BAC): Passed the stress tests but did not ask to boost its dividend or buy back shares.

Bank of New York Mellon (BNY): A $1.16 billion share buyback and continuation of its dividend, now at 13 cents a quarter.

BB&T Corp. (BBT): Boosted its dividend to 20 cents a share from 16 cents. Will redeem $3.2 billion of preferred shares.

Capital One Financial (COF): Passed test. Did not ask to boost its dividend or buy shares.

Citigroup
: Will submit a new capital plan this year.

Fifth Third Bancorp: Passed stress test. No comment on plans.

Goldman Sachs (GS): Expects to buy back shares and boost its dividend. The dividend is now 35 cents a quarter.

JPMorgan Chase: Boosted its quarterly dividend 5 cents to 30 cents a share. Will buy in $15 billion in common shares.

Keycorp (KEY): Will buy back $344 million in shares and may boost its dividend.

MetLife: Disappointed that it missed meeting a capital threshold but also disagrees with the Fed's analysis. Wants to buy back $2 billion in stock and raise its quarterly dividend to 27.5 cents a share. The dividend is now 18.5 cents.

Morgan Stanley (MS): Will buy an additional 14% of Morgan Stanley Smith Barney and will continue its current common and preferred dividends.

PNC Financial Services (PNC): Expects to boost its common dividend in the second quarter and may start a "modest" share repurchase plan.

 
Regions Financial (RF): Will sell $900 million of common stock to help finance buying back $3.5 billion in preferred shares sold to the government in 2008 during the worst of the financial crisis.

State Street (STT). Passed tests. Will announce plans Wednesday.

SunTrust Banks (STI). Failed test. No comment.

US Bancorp: Boosted its quarterly dividend to 19.5 cents a quarter from 12.5 cents. Will buy back up 100 million common shares.

Wells Fargo: Boosted its dividend to 22 cents from 12 cents. May buy in shares.

12Comments
Mar 13, 2012 5:46PM
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Here we go.  Banks now given the green light to.

 

Reward the rich

Reward the investors

Reward the CEO

 

Screw the customers.

 

Back to business as usual for them, prior to 2008.   And for the d**k face Dimon... I will happily spit in his face the next time the banks fail and we (hopefully) choose to LET THEM FAIL.

 

This is the thanks they give us for bailing them out.  And they take all of that money they stockpiled and instead of lending out to people, they pay the top 1% with it.

 

Love my Credit Union.  Smile

Mar 13, 2012 5:53PM
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These banks need to be regulated, more.  Unbelievably, brazen behavior.  Take them to the woodshed, they are making a mockery of the capital requirements to keep them honest!  Did I really say honest?   Crooks, the lot of 'em!
Mar 13, 2012 6:12PM
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Metlife not a bank? Funny how we keep getting a mortgage statement from an insurance company every month?
Mar 13, 2012 6:15PM
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Of course Dimon and his ilk don't want more regulation.  If they are too big to fail, they are too big to jail.
Mar 13, 2012 6:25PM
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Some of the Big Bankers should be concerned with the Justice Department's announcement that it is doing an interest rate probe for alleged manipulation of the Libor rate.
Mar 13, 2012 6:37PM
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I'm glad to see that the banks are doing well. Who couldn't with zero cost for money. In the mean time I followed the plan (I recall the gov't endorsing this concept for 401ks) that when you're young you invest in equities and when you are ready to retire you move to cash. Only problem is cash pays almost nothing because the FED gave it to the banks.  So after all said and done, we the baby boomers are financing this deal.

 

Unfortunately we'll be financing this deal again when inflation kicks in and eats up our cash value.

Mar 13, 2012 7:18PM
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I'm SHOCKED to see Citigroup on this list of FAILURES. And after all Citibank did for me - close my credit card account, force me to pay off the balance, and at TWICE the apr (16%). I won't detail the notices constantly reminding [threatening] me about continuing to raise the interest rate if I was ever late. I had a great credit score at the time, never missed or was late on a payment.
BTW, did you happen to see that survey that popped up this morning about whether you would be opening an account with Citibank? The categories were something like soon, 6 months, a year, and Never. The results of the poll as of this morning showed over 80% of the responders answered NEVER.


Mar 13, 2012 6:29PM
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Wow, when are we gonna figure it out? we just continued to let it happen, they didn't proform any stress test on the banks, they just needed to say something to make it look like were doing better. Nothing has changed, no jobs, people still losing there houses, gas prices going up again, food prices going up, is your pay going up? to cover the inflation? I highly doubt it, in fact I bet most of us are wandering where to cut cost to survive this lovely ecomony that were in. When are you getting your cost of living raise? The banks just got theirs! 

Mar 13, 2012 7:11PM
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What's the difference. Thanks to the Fed and decline of true capitalism in the financial industry it's all funny money now anyway.
Mar 14, 2012 2:07PM
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After such a good day yesterday, today is going as expected....A combination of some profit taking and these scumbags, are beyond peed off;  laughable but, we all know they will be back...At about 1320 hrs they called to sell on anything and everything...Like we said before, not too surprising....Still a couple of hours to go...More after the close.
Mar 13, 2012 11:38PM
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How sweet it is! Well done Santorum!

 

Romney spent 55 million and Santorum spent 5 million. LOL

 

Go Santorum!

Mar 13, 2012 7:14PM
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Obama in 2012!

 

Van Hollen in 2016 & 2020!

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