WASHINGTON-The Federal Reserve yesterday cleared the way for some major banks to boost stock dividends, prompting announcements from JPMorgan Chase, Wells Fargo and US Bancorp.JPMorgan Chase said it is increasing its dividend to 25 cents a share from 5 cents, Wells Fargo hiked its dividend to 12 cents a share from 5 cents and US Bancorp boosted its dividend.JPMorgan also authorised a $15 billion stock repurchase program with up to US$8 billion approved for this year. US Bancorp authorised a buyback programme of up to 50 million shares.Banks can increase dividends if they pass "stress tests" showing that they can weather another recession.
The Fed said it had completed those tests and expects that "some firms" will increase or resume dividend payments, buy back shares or repay government capital. The Fed isn't revealing either the names or number of banks that are expected to do so.All of the 19 largest banks overseen by the Fed were subject to the examinations. Those banks include Citigroup Inc, Bank of America Corp, JPMorgan Chase & Co and Wells Fargo & CoDuring the financial crisis banks slashed dividends to build capital cushions to absorb losses. Regulators barred banks from boosting dividends without obtaining approval.
By increasing payments, banks may be able to attract new investors, which should lead to more lending to people and businesses, the Fed said.The Fed said it is taking a "measured and conservative approach" on banks' dividend requests. The Fed said it expects banks to limit dividends to 30 per cent or less of their anticipated earnings. A green light from the Fed on bigger dividend payments also would signal that banks are in better financial shape.Federal regulators have been working closely with banks to strengthen operations and get lending flowing more normally again after the worst crisis since the 1930s.The Fed said Friday that the 19 banks had increased common equity by more than $300 billion from the end of 2008 to the end of 2010. Overall, both the banks' amount and mix of capital have improved since the financial crisis, the Fed concluded in a paper released Friday. (AP)