Bank of America Corp (BAC) Is the Winner, and JPMorgan Chase & Co. (JPM) the Loser

On the back of yesterday’s gains, stocks opened moderately lower this morning, with the S&P 500 (S&P Indices:.INX) and the narrower, price-weighted Dow Jones Industrial Average (Dow Jones Indices:.DJI) down 0.43% and 0.42%, respectively, as of 10:05 a.m. EDT. Today may see the end of the Dow’s 10-day winning streak, while the S&P 500 is slipping away from its October 2007 high of 1,565 after coming within two points of the record yesterday.

Bank of America Corp (NYSE:BAC)Yesterday, the Federal Reserve announced the results of its review of big banks’ capital plans. The review is part of the Fed’s annual Comprehensive and Capital Analysis and Review, which includes the so-called “stress tests.” These results have immediate implications for shareholders, as the capital plans submitted to the Fed include banks’ proposals for returning capital to investors via dividends and share repurchases.

The two big winners today are Dow component Bank of America Corp (NYSE:BAC) and Citigroup Inc. (NYSE:C). The former intends to buy back $5 billion in common shares and redeem approximately $5.5 billion in preferred shares (Berkshire Hathaway’s, presumably). The latter has plans for a $1.2 billion share buyback (Citigroup’s plan was already released last week). For Bank of America Corp (NYSE:BAC) and Citi, these are the first share buybacks of any substantial size since the financial crisis took hold and the banks required government support. However, note that both are maintaining their dividend at a nominal $0.01 per share. Bank of America Corp (NYSE:BAC) is up more than 3% on the news, while Citigroup is down 0.6%.

Among the top six banks, JPMorgan Chase & Co. (NYSE:JPM) is undoubtedly today’s big loser, followed closely by Goldman Sachs Group, Inc. (NYSE:GS). Although the Fed did not object to their capital plans, it is requiring them to resubmit plans by the end of the third quarter, citing “weaknesses in their capital planning process.” In estimating their potential losses under a doomsday scenario, both banks vastly undershot the Fed’s own estimates, with JPMorgan Chase & Co. (NYSE:JPM) producing a laughable figure of $200 million compared to the Fed’s $32.3 billion.

JPMorgan Chase & Co. (NYSE:JPM) will raise its dividend from $0.30 per share to $0.38. However, it is slashing its share buyback program to $6 billion from $15 billion in 2012 in order to preserve capital and meet capital-ratio requirements faster. The bank is also receiving unwanted attention today: The U.S. Senate’s Subcomittee on Investigations has released a 307-page report on the “London Whale” trading loss fiasco, and JPMorgan Chase & Co. (NYSE:JPM) executives will face difficult questions at a Senate hearing today.

JPMorgan Chase & Co. (NYSE:JPM) stock has dropped 3.2% so far today, while Goldman Sachs has lost a more moderate 0.4%.

The article Bank of America Is the Winner, and JPMorgan the Loser originally appeared on Fool.com and is written by Alex Dumortier, CFA.

Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can follow him on LinkedIn. The Motley Fool recommends Goldman Sachs. The Motley Fool owns shares of Bank of America, Citigroup Inc (NYSE:C) , and JPMorgan Chase & Co (NYSE:JPM).

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!