Fed Stress Test Trips Up Some Big Banks' Plans

Bank of America
Bank of America

The annual stress tests on the biggest U.S. banks produced a few surprises when the results were announced last night. The capital plans submitted by J.P. Morgan Chase & Co. (NYSE: JPM), Goldman Sachs Group Inc. (NYSE: GS), BB&T Corp. (NYSE: BBT) and Ally Financial were rejected. That means that shareholders are unlikely to receive larger dividends or benefit from increased share buybacks from these banks.

Among the banks getting approval for their capital plans were Citigroup Inc. (NYSE: C) and Bank of America Corp. (NYSE: BAC). American Express Co. (NYSE: AXP) received approval to pare back its stock repurchase plan.

J.P. Morgan already had received approval to repurchase $6 billion in stock and boost its quarterly dividend from $0.30 to $0.38 a share, but the bank's CEO warned that it may have to cut its plans after it prepares a new capital plan at the end of the third quarter. Goldman will also submit a new plan at the same time.

Bank of America plans to repurchase up to $5 billion in common stock and $5.5 billion in preferred stock. The bank's quarterly dividend of $0.01 will not change.

Citigroup plans to buy back $1.2 billion in common stock through the end of the first quarter of next year and plans no change to its $0.01 quarterly dividend.

Shares of J.P. Morgan are trading down about 2% in the premarket this morning, at $50.06 in a 52-week range of $30.83 to $51.00.

Goldman's shares are trading down about 1.6%, at $151.62 in a 52-week range of $90.43 to $159.00.

Bank of America is trading up 3.7% at $12.56, a 52-week high, in a current range of $6.72 to $12.44.

Citigroup is trading up fractionally at $47.50 in a range of $24.61 to $47.92.

Filed under: 24/7 Wall St. Wire, Banking & Finance, Regulation Tagged: AXP, BAC, BBT, C, featured, GS, JPM