Wells Fargo board set for next quarterly dividend hike after passing Fed stress test

Wells Fargo & Co.’s board of directors is expected to raise the bank’s quarterly dividend by 5 cents to 45 cents in the next step of emerging from a near 7½-year Federal Reserve-imposed total asset cap.

Wells Fargo announced its intentions Tuesday, which followed up on the Fed disclosing Friday that the nation’s 22 largest national and super-regional banks had passed the latest economic stress test.

The Fed’s Board of Governors conducts the stress tests as required by the Dodd-Frank Act. Typically, banks disclose dividend and share-repurchase plans within days of gaining permission.

The Wells Fargo board is scheduled to authorize the dividend increase at its meeting later this month.

At 45 cents, the Wells Fargo dividend would be within 6 cents of its pre-COVID-19 pandemic level.

“The company has capacity to continue repurchasing common stock, which will be routinely assessed as part of the company’s internal capital adequacy framework that considers current market conditions, regulatory capital requirements and other risk factors,” the bank said.

In April, the board announced plans for a new stock-repurchase program worth up to $40 billion. Share repurchases under the new authorization will commence upon the completion of its current program.

Wells Fargo reported April 11 spending $3.5 billion to repurchase 44.5 million shares during the first quarter.

By comparison, during fiscal 2024, the bank spent $20 billion on share repurchases.

Wells Fargo dropped the dividend from 51 cents to 10 cents in response to the pandemic’s shock to the economy and consumer spending, in particularly its first quarterly loss in 11½ years during the second quarter of 2020.

The Fed said June 3 it had removed the total assets restrictions, allowing the bank to grow beyond the $1.95 trillion asset cap imposed in February 2018.

The asset cap was established in response to the bank’s fraudulent checking account scandal that erupted in September 2016. For banks, loans are considered assets.

The asset cap has put Wells Fargo at a competitive disadvantage compared with its national bank peers JPMorgan Chase & Co., Bank of American Corp. and Citigroup.

Fed Chairman Jerome Powell said in 2021 the asset cap would remain until the Fed is confident that Wells Fargo has resolved a series of internal governance and risk-control issues.

Truist Financial Corp. said Tuesday it would not increase its quarterly dividend of 52 cents after passing the stress test.

Truist said it has spent $2.2 billion as of June 30 toward a $5 billion share repurchase program authorized by its board of directors in 2024.

“Truist’s 2025 annual stress test results again demonstrate the benefits of our diverse business mix and prudent and disciplined risk management culture,” Truist chairman and chief executive Bill Rogers said.

Bank of America expects its board of directors to approve raising its quarterly stock dividend by 2 cents to 28 cents.

The Fed said the annual bank stress test showed that “large banks are well positioned to weather a severe recession, while staying above minimum capital requirements and continuing to lend to households and businesses.”

The stress test reviewed banks’ ability to withstand a severe global recession with a 30% decline in commercial real estate prices, a 33% decline in house prices and the U.S. unemployment rate jumping from 4.1% to a peak of 10%.

The 2025 stress test could be the last annual version with the Fed proposing in April conducting the reviews every two years “to reduce volatility from the stress test when calculating a firm’s capital requirement.”

Total projected losses for the 22 banks was more than $550 billion, including: nearly $158 billion in credit card losses; $124 billion in losses from commercial and industrial loans; and $52 billion in losses from commercial real estate.

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