WFC - Large Banks to be Conservative About Shareholder Payouts | Benzinga
The Federal Reserve is slated to announce its annual bank health check results on Jun 26. Also known as the ‘stress test' the results will show how much capital large banks need to withstand any renewed turmoil in the sector.
This annual exercise will also dictate how much banks will return to shareholders through dividend payouts and share repurchases. Last year, some notable ones announcing a hike in quarterly dividends were JPMorgan (NYSE: JPM), Goldman Sachs (NYSE: GS), Wells Fargo (NYSE: WFC) and Morgan Stanley (NYSE: MS). Also, Bank of America (NYSE: BAC) and Citigroup (NYSE: C) raised their dividend payouts.
Need for the Annual Stress Test
The annual stress tests are mandated under the Dodd-Frank financial services law and have been conducted annually since 2009 (except in 2020, when the banks were tested twice because of the pandemic).
Introduced in the aftermath of the 2008 financial crisis, the stress tests evaluate banks' capital adequacy, liquidity and risk management practices under adverse hypothetical scenarios, such as a deep recession or a sharp decline in asset prices.
The test evaluates whether banks' ...