Preview: Another Week, Another Banking Stress Test – Bank of America Corp (BAC), JPMorgan Chase & Co. (JPM)

During the boom of the U.S. banking system during the previous decade, investors were rewarded with hefty capital gains and massive chunks of cash in the form of common stock dividends.

As we fast forward to the present, shareholders of these banks are yearning and thirsty for a return to the cash-rich days. With the release of the Federal Reserve’s Comprehensive Capital Analysis and Review (CCAR) results on Thursday afternoon, investors will learn if the largest U.S. banks will be allowed to return more capital to shareholders. Despite the upward trajectory of bank profits in recent years, banks and regulators are still haunted by memories of the massive liquidity crisis almost five years ago.

Bank of America Corp (NYSE:BAC)The CCAR results will detail each bank’s capital positions assuming no additional capital actions plans (just like last week’s Dodd-Frank stress test results), as well as account for the impact of any proposed capital action plans (increases in dividends or share repurchase) that each bank has submitted for approval. Given the stigma of banks having to cut dividends, the Fed will only approve capital plans that do not bring the bank’s capital levels to a dangerously low level under a global economic downturn.

After last week’s Dodd-Frank stress test results showed consistent capital ratio improvement year over year for almost every bank, investors’ expectations for dividend growth and increased share repurchase capacity have crept higher. Here is a breakdown of what each bank proposed during last year’s CCAR process:

Click on the name of each company to see a preview of this year’s results:

The Big Four
Company Name 2012 CCAR Capital Actions
Bank of America Corp (NYSE:BAC) Did not request a dividend increase or new buyback approval.
Wells Fargo & Co (NYSE:WFC) Approved: Increased dividend and share buybacks.
JPMorgan Chase & Co. (NYSE:JPM) Approved: Increased dividend and share buybacks.
Citigroup Inc. (NYSE:C) Denied: Increased dividend.
Regional Banks
Company Name 2012 CCAR Capital Actions
BB&T Corporation (NYSE:BBT) Approved: Increased dividend and redeemed trust preferred securities.
Regions Financial Corporation (NYSE:RF) Approved: Repurchase of preferred stock from TARP.
Fifth Third Bancorp (NASDAQ:FITB) Denied: Increased dividend.
Approved: Share buybacks.
KeyCorp (NYSE:KEY) Approved: Share buybacks. Later increased dividend.
SunTrust Banks, Inc. (NYSE:STI) Did not request a dividend increase or new buyback approval.
PNC Financial Services (NYSE:PNC) Approved: Increased dividend and share buybacks.
U.S. Bancorp (NYSE:USB) Approved: Increased dividend and share buybacks.
Others
Company Name 2012 CCAR Capital Actions
Goldman Sachs Group, Inc. (NYSE:GS) Approved: Increased dividend and share buybacks.
Morgan Stanley (NYSE:MS) Approved: Us (NYSE:USB)e of cash on acquisition of Morgan Stanley Smith Barney.
American Express Company (NYSE:AXP) Approved: Increased dividend and share buybacks.
The Bank of New York Mellon Corporation (NYSE:BK) Approved: Share buyback plan. Did not request a dividend increase.
Capital One (NYSE:COF) Did not request a dividend increase or new buyback approval.
State Street (NYSE:STT) Approved: Increased dividend and share buybacks.

The article Preview: Another Week, Another Banking Stress Test originally appeared on Fool.com and is written by David Hanson.

David Hanson owns shares of Goldman Sachs. The Motley Fool recommends American (NYSE:AXP) Express, Goldman Sachs, and Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, Fifth Third Bancorp, JPMorgan Chase, KeyCorp, PNC Financial Services, and Wells Fargo.

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

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

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!