USA banks clear stress test

Citigroup Announces 53,000 New Job Cuts

As a result, all of the banks, including the nation's four largest - JPMorgan Chase, Bank of America, Citigroup and Wells Fargo - can now raise dividends or repurchase their shares.

"For some time, we have retained a significant amount of capital in excess of what is needed to prudently operate and invest in the firm". Analysts expect at least several of the big banks to come out of the test with plans to substantially increase returns to shareholders - potentially using cash reserves to pay out more than 100 percent of their profits. "This consistent performance will enable us to once again achieve our objective of returning 60 to 80 percent of earnings to shareholders in 2017 through dividends and share buybacks".

"We are pleased to receive a positive CCAR result, with continued increasing return of capital to shareholders highlighted by a almost 30% increase in our dividend next quarter and sizable share repurchases", said Chairman and Chief Executive Officer Bruce Van Saun.

Common share repurchases of up to $850 million, an increase of 23% versus the 2016 Capital Plan.

Despite gains for the banks, the main USA share indexes were all lower shortly after trading began.

After the results were made public, the banks quickly jumped in with announcements of dividend boosts and share buyback plans.

Walgreens Boots Alliance shares were up 1.7 percent after it terminated agreement to buy Rite Aid Corp, and would instead buy 2,186 Rite Aid stores and some distribution centers for $5.18 billion.




Now the banks have a total of about $1.2 trillion in capital reserves as of the fourth quarter of previous year, an increase of $750 billion over the beginning of 2009, in the depths of the crisis, according to the Fed.

Additionally, the board of directors of U.S. Bancorp has approved a four-quarter authorization to repurchase up to $2.6 billion of its outstanding stock, beginning on July 1, 2017, to replace the current four-quarter authorization, which expires on June 30, 2017.

"This is the big payoff after seven years of pushing the industry to get to a place where capital planning is well ingrained", said Mr David Wright, managing director at Deloitte's advisory business.

"Banking stocks jumped after regulators in the USA gave the green light to higher dividends and buybacks, whilst the hint of a shift in tone from central bankers towards tightening is spurring hopes of higher interest rates again", ETX Capital analyst Neil Wilson said in a note.

American Express was forced to scale back its planned capital returns. Shares climbed more than 1 percent in extended-hours trade.

That in turn hurt sectors such as utilities, which suffer as growing expectations of rate hikes make their constant dividend flows less attractive. The bank still received conditional approval to proceed with its plans and shore up its processes by the end of the year. John Lyon, Ned Davis Research Group's US market analyst said that despite lower valuations and strengthening economic indicators, falling long-term rates are weighing on bank stocks.

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