US banks began returning money to shareholders after stress tests

The largest US banks will learn the latest results of the stress tests from the US Federal Reserve this week, the passing rating is expected to be a stimulus for the repurchase of billions of dollars worth of shares.

The expectation that banks will return more money to shareholders shows how much cash the US banking sector has accumulated during the epidemic. People like Goldman Sachs և JPMorgan Chase have been supported by government և business կառավարության transaction incentives և with large revenues.

“The big banks have gone into an epidemic, looking over-capitalized, they look more capitalized after more than a year of stock no-return,” said Jeffrey Harten, senior research analyst at Piper Sandler.

“They used to buy a lot of stocks before the epidemic, but now a year of their balance sheet capital means we expect it to grow significantly,” Hart added.

Last year, the Fed cut dividends and banned the repurchase of shares in the wake of the Covid-19 epidemic. The Central Bank eased some of those restrictions in 2021. Initially, however, it limited the amount that banks could return to shareholders before the accumulated profits of the previous four quarters.

These limits will be withdrew further to the results of the տարեկան Annual Comprehensive Capital Analysis վերլուծ Review, known as CCAR և Dodd-Frank Post-Crisis Financial Regulations. The results will be announced on Thursday, June 24.

To “transfer” CCAR, the 23 participating banks must prove that they have sufficient capital to overcome a number of tensions Doomsday Scenarios և occur with the least amount of residue.

These scenarios include the collapse of the US stock market – a sharp decline in economic output. There was a significant catastrophic scenario for commercial real estate, the focus of which was on the rate at which the business would return to office work.

From the tests, the Fed will determine for each bank how much high-quality common stock, or CET1 capital, exceeds the regulatory minimum they must maintain through the so-called stress capital buffer. The CET1 ratio, as measured against risk-weighted assets, is a potential benchmark for financial stability.

Last year first time The Fed has adopted this approach to stress capital buffering.

After giving the green light, it will not be a problem to find money to return to the shareholders. US banks are more into cash than they know what they are doing.

JPMorgan, the largest bank in the United States, raised its stock of CET1 to $ 206 billion at the end of the first quarter, up from $ 184 billion a year earlier. Its CET1 capital at Goldman Sachs grew to $ 85.2 billion from $ 75.55 billion during the same period, while Morgan Stanley grew $ 94.3 billion to $ 74.7 billion.

Banks usually aim to exceed capital above the regulatory minimum. Analysts say the big banks have enough cash on their balance sheets to return more money to shareholders while still sitting comfortably on regulatory requirements.

Repurchasing own shares is now less effective than it would be when stock prices for Goldman, JPMorgan and Morgan Stanley fell in March 2020 at the start of the coronavirus epidemic. Their shares have been accumulating since September, which is the highest level of all time against the background of trading activity, as well as the bright outlook for the US economy.

However, Barclays analysts estimate that the average bank out of 20 that it և undergoes stress testing will return more than 100% of its profits to shareholders next year and return $ 200 billion in capital to investors.

“Whether or not they tell you how much they’re going to take back is irrelevant,” said Barclays analyst Jason Goldberg. “They are all going to buy back the shares and increase the dividend.”

In addition to the major US banks, CCAR is also subject to US subsidiaries of foreign banks with US investment banking operations.

This includes the Swiss bank Credit Suisse, whose risk control is facing an investigation into the $ 5.5 billion loan damage provided to the office of Bill Hwang’s Archegos family.

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