The Fed established that Wells Fargo & Co (NYSE:WFC) could withstand a financial-crisis situation and cleared its capital plan. Several other major U.S. banks took the annual test, which is mandated by the regulator. The approval of Wells Fargo’s capital proposal allows the bank to return more money to shareholders.
Have analyst identified a ongoing trend in WFC?
The famous stress-test seeks to determine how banks would perform in an extraordinarily challenging financial situation. Fed approves or rejects capital plans depending on a bank’s ability to survive a tough financial environment.
Following the success at this year’s stress-test, Wells Fargo & Co (NYSE:WFC) is expected to hike its dividend payout to shareholders. The bank wants to raise annual dividend to nearly $0.38 per share, up from $0.35 in the previous year.
Wells Fargo & Co (NYSE:WFC)’s buyback plans are currently not very clear. However, the bank is expected to continue with last year’s approval to repurchase 350 million shares. At the end of 2014, WFC had nearly 240 million shares remaining under its existing authorization.
The Fed stress-test is taken by some 31 global banks that have major operations in the U.S.
Other major banks raising dividends
Some of the other major banks that have secured regulatory approvals on their capital plans for 2015 are Citigroup Inc (NYSE:C) and Bank of America Corp (NYSE:BAC). The others are JPMorgan Chase & Co. (NYSE:JPM) and Morgan Stanley (NYSE:MS).
Citigroup intends to return $0.05 per share to shareholders in annual dividend, which comes as a 400% increase from the previous dividend. The bank will also reward its shareholders with $7.8 billion in stock repurchase. Citigroup failed to pass last year’s stress-test.
Bank of America also got a nod to buy back its own shares and is expected to return $4 billion to shareholders through stock repurchases. The bank will also continue to pay $0.05 in dividends. However, the regulator required BAC to revise its capital plan and submit it again in the fall.
JPM and will also raise their dividend payout to $0.44 per share and $0.15 per share, respectively. They have also announced buybacks of $6.4 billion and $3.1 billion, respectively.