America's 8 biggest banks halt share buybacks as crisis deepens
America's eight biggest biggest banks are slamming the brakes on their aggressive share buyback programs as they promise to preserve capital to get through the coronavirus crisis. The financial institutions announced the buyback decision simultaneously evening just after the Federal Reserve took emergency actions aimed at staving off a deep economic recession.
The Financial Services Forum said its member institutions - Bank of America (BAC), Bank of New York Mellon (BK), Citigroup (C), Goldman Sachs (GS), JPMorgan Chase (JPM), Morgan Stanley, (MS) State Street (STT) and Wells Fargo (WFC) - are temporarily suspending share buybacks for the rest of the first quarter and the second quarter of 2020 in light of the coronavirus pandemic.
"The COVID-19 pandemic is an unprecedented challenge for the world and the global economy and the largest US. banks have an unquestioned ability and commitment to supporting our customers, clients and the nation," the group said in a statement. They added that each bank "retains the ability to reinstate its buyback program as soon as circumstances warrant." US Bancorp, which is not part of the group, also announced it is temporarily suspending share buybacks because of the coronavirus.
The decision reflects a realization that it would look bad for banks to reward shareholders with massive buybacks while simultaneously taking unpopular steps such as foreclosures, pulling credit lines, freezing hiring and laying off workers. And it could be aimed at easing pressure on big banks to cut their dividends.
"There is tremendous political pressure on the banks to retain capital. This step should help," Jaret Seiberg, analyst at Cowen Washington Research Group, wrote in a note to clients. However, Seiberg warned that pressure will build on big banks to cut their dividends if the economic crisis gets much worse: "This may become more of a political issue than a safety and soundness issue."
The coronavirus pandemic has crushed global markets. US stocks plunged into a bear market last week and the Dow is on track to plummet more than 2,000 points, or roughly 10%, Monday morning. The United States said Saturday it was stepping up its fight against the coronavirus and extending a European travel ban to include the United Kingdom and Ireland, while acknowledging that some domestic travel curbs were also being considered.
President Donald Trump has decided to "suspend all travel from the United Kingdom and Ireland" effective midnight Monday EST (0400 GMT Tuesday), Vice President Mike Pence told a White House news conference. "Americans in the UK or Ireland can come home. Legal residents can come home," Pence said, adding that such people would be "funneled through specific airports and processed."
Trump meanwhile advised against nonessential travel, and said officials were considering imposing travel restrictions within the United States. "If you don't have to travel, I wouldn't do it," Trump told the news conference. "We want this thing to end. We don't want a lot of people getting infected."
Trump spoke to British Prime Minister Boris Johnson Saturday about the new restrictions, according to the White House press office.
European officials have reacted angrily to Trump's sweeping travel ban, which also caused widespread consternation among travelers.
The original 30-day US ban on travel from the 26 countries in Europe's Schengen border-free zone took effect on Saturday, but notably excluded Britain and Ireland.
A senior administration official said he believed that the new limits on travel from the UK and Ireland would be for the same period of time as the restrictions already imposed on continental Europe.
The administration had hoped to stop anyone from the continent using the UK and Ireland as transit points en route to the United States, the official told reporters in a background briefing, "but that is proving operationally very difficult for us."