JPMorgan's $50 billion buyback and dividend hike after the Fed stress test

JPMorgan Chase announced a new $50 billion share buyback on Wednesday and raised its quarterly dividend after the Fed's annual stress test showed the industry remained “well capitalized.”

The nation's largest bank by assets said it would raise its quarterly dividend 10% to $1.65 per share, subject to board approval, and authorized the buyback effective July 1.

JPMorgan CEO Jamie Dimon said in a statement: “The board's proposed dividend increase is supported by our continued investment in the business and solid financial performance. As always, we are prepared for all scenarios, including the hypothetical 2026 regulatory 'severely adverse' scenario.”

Meanwhile, Goldman Sachs also raised its quarterly dividend, saying it would increase the payout 11% to $5 per share and citing strong earnings and capital position.

Wells Fargo said it expects to raise its dividend 11% to 50 cents per share; Morgan Stanley will increase its payout 15% to $1.15 per share and has also reauthorized a $20 billion multi-year common-stock buyback program.

Bank of America CEO Brian Moynihan said the bank will announce its dividend plans next month.

The announcements came after the Fed released its annual stress test. The results showed that 32 large banks remained above minimum capital requirements under a hypothetical recession scenario, in which the industry is projected to incur losses of more than $708 billion.

Unlike in prior years, the stress test results will not affect banks' capital requirements. The Fed had previously said it would keep the stress capital buffer unchanged until 2027 while reforming the testing methodology. As a result, banks entered Wednesday's test already knowing their capital requirements.

Although analysts expect the test to have little short-term impact, banks still chose to move ahead with dividend increases during the regulatory 'wait-and-see' period, reflecting market confidence.

Before the results were released, KBW said in a note that this year's stress test was essentially a formality, arguing that investors are more focused on the Basel III Endgame proposal expected later this year than on the Fed's annual routine test.

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