Banks announce dividend plansTruist, Wells Fargo, Bank of America announce dividend hike plans
Winston-Salem Journal (NC)
The three largest banks serving the Triad - Truist Financial Corp., Wells Fargo & Co., and Bank of America Corp. - announced Monday plans to raise their quarterly dividend.
Each bank's board of directors are required to approve the dividend hikes, which is highly likely to occur during their July meetings, according to industry analysts.
The dividend hikes come after the Federal Reserve gave Thursday the green light again to the nation's 34 largest banks to raise their quarterly dividends and authorize larger share-purchase programs.
The Fed requested that the 34 banks wait until Monday afternoon before disclosing future capital plans.
Truist said its quarterly dividend would increase by 8.3%, or from 48 to 52 cents, beginning in the third quarter.
"Truist's strong stress test results, combined with this past year's solid financial results and a successful integration, means that we are well positioned to execute on our strategy," Truist chairman and chief executive Bill Rogers said in a statement.
"Truist will continue to strategically deploy capital on behalf of our clients and shareholders, while also thoughtfully managing risk."
Wells Fargo plans the largest percentage increase of 20%, or from 25 to 30 cents, also starting in the third quarter.
Wells Fargo said it "has significant capacity to execute on common stock repurchases" between the third quarter and the second quarter of 2023.
A publicly traded company typically buys back its shares from the marketplace to reduce the number of outstanding stock shares.
Because there are fewer outstanding shares, those remaining can become more valuable. Companies also buy back shares when they believe the shares are undervalued.
The bank said share repurchases "will be routinely assessed as part of the company's internal capital adequacy framework that considers current market conditions and other risk factors."
Wells Fargo chief executive Charlie Scharf said in a statement that the bank is "well-positioned to support our customers and communities, while also continuing to return excess capital to shareholders through dividends and share repurchases."
Bank of America is raising its dividend by 4.8%, or from 21 to 22 cents.
"Our responsible growth strategy over the last decade has put us in a strong position to support our clients and deliver for shareholders," Bank of America chairman and chief executive Brian Moynihan said in a statement.
PNC Financial Services Group Inc. said Monday it has no plans for increase its quarterly dividend beyond the 25-cent hike to $1.50 that went into effect May 5.
Earlier in the second quarter, PNC said its board of directors authorized a new repurchase framework under the already approved authorization for repurchases of up to 100 million common shares. About 64 million shares remain available for repurchase as of March 31.
Stress test details
The Fed's board of governors released the results of its annual stress tests, as required by the federal Dodd-Frank Act.
The stress-test scenarios are created annually by the Fed, along with the Federal Deposit Insurance Corp. and the U.S. Office of the Comptroller of the Currency.
The stress tests determine whether those banks have enough capital to weather a significant economic downturn.
The Fed said the 34 banks "continue to have strong capital levels, allowing them to continue lending to households and businesses during a severe recession."
All banks tested remained above their minimum capital requirements, despite total projected losses of $612 billion.
The board said stress tests "help ensure that large banks can support the economy during economic downturns."
The tests evaluate the resilience of large banks by estimating their capital levels, losses, revenue and expenses under hypothetical scenarios over nine future quarters.
This year's hypothetical scenario was considered by the Fed and banking analysts as tougher than the 2021 test, by design.
The scenario included: a severe global recession with substantial stress in commercial real estate (down 40%) and corporate debt markets; unemployment rate rises by 5.75% to a peak of 10% with the U.S. gross domestic product "declines commensurately;" asset prices decline sharply, including a 55% decline in stock prices.
For stress-test purposes, commercial real estate loans are for offices, hotels in urban locations or locations that tend to attract business travelers, shopping malls and strip malls, according to the Bank Policy Institute, a nonpartisan public policy, research and advocacy group that represents the nation's leading banks.