U.S. Banks To Spend $140 Billon On Dividends And Stock Buybacks

Wall Street banks are set to announce dividend increases and stock buybacks after the U.S. Federal Reserve’s stress tests showed the industry built up a stockpile of cash during the pandemic.

American lenders can announce their plans for distributing capital after the market closes on June 28, and payouts are expected to be the largest ever following the Fed’s annual stress test.

Early estimates indicate that the six biggest U.S. banks, including JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC) and Citigroup (NYSE:C), could return more than $140 billion U.S. to shareholders.

The passing of the stress test means that the banks are officially free from restrictions that the regulator put on dividend payments and share repurchases last year when COVID-19 was hurting the U.S. economy.

The hypothetical crisis envisioned in this year’s financial institution stress test included a nearly 11% unemployment rate and the stock market tanking by more than half. The banks use those numbers to assess how much capital they can afford to dole out to investors, a metric known as the stress capital buffer.

The American banks don’t need the Federal Reserve’s approval of their capital plans as long as each lender stays above its established capital minimum.