US banks boost dividends after Fed stress test success; Morgan Stanley latest to scrap UK bonus cap
US banking giants Bank of America, Citigroup, Morgan Stanley and JPMorgan announced plans on Friday to return excess capital to shareholders through increased dividend payouts and hinted at substantial future stock buybacks after passing the Federal Reserve’s annual stress tests last week.
According to regulatory filings, JPMorgan, the largest US lender, increased its dividend by almost 9 per cent to $1.25 per share from $1.15 and authorised $30bn in new share buybacks starting July 1.
In a statement, JPMorgan CEO Jamie Dimon said: “The strength of our company allows us to continually invest in building our businesses for the future, pay a sustainable dividend, and return any remaining excess capital to our shareholders as we see fit.”
Morgan Stanley also lifted its dividend by nearly 9 per cent and approved a $20bn buyback programme. Meanwhile, Bank of America raised its dividend to 26 cents per share from 24 cents, while Citi’s dividend increased by 6 per cent to 56 cents per share.
The amount of capital large US banks are required to hold has become a significant political debate, with higher capital requirements proposed under draft rules known as the Basel III endgame prompting aggressive lobbying by the banking industry.
Read more
—
Morgan Stanley is set to revise its pay structure following the UK’s decision last year to scrap the cap on banker bonuses. As reported by the Financial Times, regulatory filings reveal the bank will implement an “appropriate internal bonus cap”, though details remain undisclosed.
The UK abolished the cap on banker bonuses, set at two times base salary, last year as part of its post-Brexit strategy to bolster the City of London’s competitiveness. Morgan Stanley’s decision follows similar actions from rivals JPMorgan and Goldman Sachs. Citigroup is also seeking regulatory approval to change its pay structure, according to the FT.
Goldman Sachs has lowered base pay while increasing the bonus ratio to 25 times income, while JPMorgan has opted to keep fixed pay steady, allowing bonuses up to 10 times earnings.
The new policies are expected to intensify competition for top banking talent in London. The heads of some European banks, still restricted by EU rules limiting bonuses to two times fixed pay, have voiced concerns about their ability to compete for hires.
—
Austrian regulators have imposed a record fine of €2.07mn on Raiffeisen Bank International for deficiencies in its money laundering and terrorist financing checks, the country’s Financial Market Authority announced on Friday.
According to Reuters, citing an anonymous source, the penalty — the largest ever imposed by Austrian regulators — stemmed from RBI’s dealings with two unnamed banks in Cuba and Bahrain. Commenting on the FMA’s decision, an RBI spokesperson said: “The allegations […] are unfounded”, and added that the lender would challenge the penalty in court.
The FMA’s penalty adds to RBI’s challenges, as it faces scrutiny for continuing to maintain its business in Russia, unlike many of its western peers who are withdrawing from the market. Last month, RBI announced that it had suspended all outgoing payments in US dollars from the country, following warnings from the US Treasury that it could be “shut out” of the US financial system.
—
BBVA’s chair said on Friday that the bank sees “no need” to improve its hostile bid for Banco Sabadell. In an interview with Reuters, Carlos Torres stated that, “It is not our intention to do it, and we don’t need to”, when asked multiple times about the possibility of adding a cash sweetener to the deal to attract Sabadell shareholders, many of whom are retail investors.
Torres described BBVA’s bid as a “knock-out offer” that values Sabadell at a 30 per cent premium. Sabadell’s board rejected BBVA’s initial offer in May, arguing that it undervalued the institution.
BBVA’s decision to pursue a hostile takeover of Sabadell has drawn significant political opposition from Spanish politicians who have said the transaction would damage competition within the country’s banking industry. The Spanish government cannot stop Sabadell shareholders from swapping their shares for those of BBVA, but it has the power to block a full merger.