Several big banks announced significant increases in their plans to return capital to shareholders after passing the Federal Reserve’s annual stress test. Financial shares jumped in extended trading.
Citigroup was the highlight after hours, doubling its quarterly dividend to 32 cents per common share and announcing a common stock repurchase program of up to $15.6 billion. That would be the biggest ever buyback for Citi, surpassing a $15 billion buyback announced in 2005 before the financial crisis, according to Richard Peterson of S&P Global Market Intelligence.
The shares jumped more than 2 percent in after-hours trading.
The Fed approved Wednesday the capital return plans of all 34 banks, the first time the whole industry passed in the seven-year history of the tests. The Financials Select SPDR ETF (XLF) climbed more than 1 percent in after-hours trade, after closing 1.58 percent higher Wednesday in its third straight day of gains.
“For some time, we have retained a significant amount of capital in excess of what is needed to prudently operate and invest in the firm. Now we can begin delivering on two of our most important priorities —returning a higher level of that capital to our shareholders and improving Citi’s overall returns,” Citi CEO Michael Corbat said in a release.
JPMorgan Chase said it would raise its quarterly dividend by 6 cents to 56 cents a share, effective the third quarter of 2017. The financial giant also said it has authorized share buybacks of up to $19.4 billion between July 1 and June 30 next year. That repurchase program was the largest in its history.
JPMorgan shares climbed more than 2 percent in extended trade.
Morgan Stanley said it would raise its divided to 25 cents a share, up from 20 cents a share. The dividend increase is set to be declared for the third quarter of 2017.
The bank also said it will increase share repurchases from $3.5 billion to up to $5 billion of outstanding common stock for the four quarters beginning the third calendar quarter of this year. Shares climbed 1.4 percent in after-hours trade.
Wells Fargo‘s capital return plan also received the Fed’s approval, despite some expectations that a consumer sales scandal might negatively affect the policymakers’ decision.
Wells Fargo said it expects to raise its common stock dividend by 1 cent to 39 cents, for four quarters beginning in the third quarter of this year and pending approval by the board. The firm’s plan also includes an up to $11.5 billion of common stock repurchases, compared to $8.3 billion in share repurchases in the four quarters ended in the first quarter of 2017.
Capital One Financial was the anomaly in the Fed’s review, receiving no objection on condition that it submit a new capital plan by Dec. 28 in order to address “weaknesses in its capital planning process.”
The stock fell 2 percent in after hours trading.