Recently freed from regulators’ coronavirus restrictions, the largest U.S. banks on Monday announced plans to return tens of billions of dollars to their shareholders over the next year in the form of dividends and stock buybacks.
It’s a signal that banks are looking to reward their shareholders after last year’s pandemic-driven losses. But it’s also a sign banks at the moment see few places to put their big profits other than back into the hands of their shareholders.
In an attempt to ensure banks could hold up in the face of a severe pandemic-induced recession, the Federal Reserve last year put into place restrictions on how much banks could pay in dividends or spend on stock buybacks. Banks at the time were reporting tens of billions in losses as businesses were shuttered and Americans were thrown out of work.
But in last week’s “stress tests,” the Fed found that all of the nation’s big banks were healthy enough to withstand a sudden economic catastrophe and ended its restrictions on dividends and buybacks.
Morgan Stanley on Monday said it would double its quarterly dividend, from 35 cents per share to 70 cents per share, with payouts expected to start in the third quarter. The bank will also buy back US$12 billion (all figures are in U.S. dollars) worth of its outstanding shares over the next year. For context, analysts surveyed by FactSet expect Morgan Stanley to make about $15.5 billion in profits this year.
Wells Fargo is also heavily upping its dividend, raising it from 10 cents per share to 20 cents a share. The bank plans to buy back $18 billion in stock over the next year, it said in a statement. That buyback plan would also consume all of Wells Fargo’s forecasted profits, with analysts expecting the bank to earn around $15.7 billion this year, according to FactSet.
JPMorgan Chase said it planned to increase its quarterly dividend to $1 per share, up from 90 cents. The bank said it plans to continue its $30 billion stock buyback plan that was announced late last year. JPMorgan is expected to post earnings of about $40 billion this year.
Other banks made similar announcements. Bank of America said it plans to raise its dividend by 17% to 21 cents per share, continuing its $25 billion stock buyback. Truist, the bank that was made when BB&T and SunTrust merged, said it planned to raise its dividend to 48 cents per share from 45 cents per share. Pennsylvania-based PNC, now one of the largest banks in the country after merging with BBVA, plans to up its dividend by 9% to $1.25 per share.