Ohio-based Fifth Third Bancorp (NASDAQ:FITB) experienced some mixed results last year after the Fed’s stress test, despite its strong performance. Though the Fed felt the bank was well-capitalized enough to initiate some share-repurchases, Fifth Third Bancorp (NASDAQ:FITB) was denied in its dividend increase request. Though it was later able to increase its dividend, other banks got to boost their payouts almost immediately.
In part one of this year’s stress test, the Dodd-Frank Stress Test (DFAST), Fifth Third again exceeded the standard, with its Tier 1 common capital ratio only declining 1% after the Fed’s tested “doomsday” scenario. While this result was pleasant news for Fifth Third investors, most were waiting for the release of the Comprehensive Capital Analysis and Review (CCAR) results, which would hopefully shed some light on the bank’s ability to return capital to investors.
On Thursday afternoon, the Fed released the results, and Fifth Third Bancorp (NASDAQ:FITB) investors should remain pleased:
Just another 1% is all
With the CCAR, a bank submits a plan to the Fed requesting a larger return to shareholders in the form of a larger dividend or share repurchases. Fifth Third Bancorp (NASDAQ:FITB) remained well above the minimum Tier 1 common capital ratio of 5% required to pass the test, proving that it can remain well-capitalized even it boosts its shareholders’ returns.
What was the plan?
As I noted earlier this week, Fifth Third Bancorp (NASDAQ:FITB) is already fairly close to the Fed’s 30% payout ratio “ceiling,” so there may not be that much room to increase its dividend. Nevertheless, the bank has requested a higher dividend, though the actual amount will be decided at a meeting of its board of directors in June. Nevertheless, most analysts expect the bank to raise its dividend by at least 20%, which would boost its annual dividend to $0.48 per share.
Source: Analyst projections; *Actual amount will be known after quarterly board meeting in June.