No sweat equity
All 34 banks pass Fed stress test
Big banks passed the Federal Reserve’s annual stress test of their financial health — and responded with a giveaway to investors worth billions of dollars in the form of dividends and share buybacks.
The passing grades mark the first time since the Wall Street crisis of 2008 that all 34 tested firms were deemed healthy enough to survive a major financial disaster.
The stress test, known as the Comprehensive Capital Analysis and Review, means banks are deemed to have enough money to avoid a Lehman Brothers-like failure during a hypothetical meltdown.
“I’m pleased that the CCAR process has motivated all of the largest banks to achieve healthy capital levels and most to substantially improve their capital- planning processes,” Fed Gov. Jerome Powell said in a statement.
The one bank that stumbled this year was Capital One, which was given until the end of the year to resub- mit stronger plans. Still, the Fed conditionally approved its offer to pay out shareholders.
The biggest winners were Banco Santander, which flunked three consecutive tests, and Deutsche Bank, which failed the past two years.
Overall, the 34 banks are holding onto $1.25 trillion in capital cushions as of the first quarter — more than double they held in 2009.
A passing grade gives banks the flexibility to return more money to investors.
JPMorgan Chase announced a 6-cent dividend hike, to 56 cents, and $19.4 billion in stock buybacks. Bank of America boosted its dividend by 60 percent, to 12 cents a share, with another $12 billion in share repurchases. Citigroup announced $18.9 billion in buybacks and dividends over the next four quarters.
Investors had anticipated positive results, sending financial stocks up, with BofA, which rose 2.6 percent, to $23.88, leading the charge among big banks.