Citigroup Inc. (NYSE:C), Bank of America Corp (NYSE:BAC) and America’s four other major banks could increase their shareholder payouts within the next year. This comes as regulators prepare to release the results of the stress tests they conducted on the six largest banks in the nation.
Today Bloomberg reports that the banks could return up to $41 billion in capital to investors over the next 12 months. That’s the most they have returned since 2007 when the economic crisis hit.
Bloomberg used data compiled by Morgan Stanley (NYSE:MS), Barclays PLC (ADR) (NYSE:BCS) (LON:BARC) and Credit Suisse Group AG (NYSE:CS) (VTX:CSGN) and included projections for buybacks through the stress tests scheduled for next March. The publication estimates that Citigroup and Bank of America will buy back $26.4 billion in shares, which is an increase from the $23.8 billion average provided by three analysts on Wall Street.
Bloomberg also estimates that an extra $14.5 billion will be paid out in the form of dividends, which is $3.4 billion more than last year. Of course those payments will only happen if the Fed approves them after a final review of the banks’ latest stress tests.
The tests were designed to allow regulators to determine if the banks have collected enough cash in order to withstand another economic crisis. The central bank will release the preliminary results of those tests on the 18 largest lenders in the U.S. tomorrow. It tested 30 banks in all, since 2009. Next week investors will find out for certain whether the largest banks will indeed be able to increase their payouts to shareholders.
Barclays PLC (ADR) (NYSE:BCS) (LON:BARC) analyst Jason Goldberg told Bloomberg that the nation’s largest banks are getting close to the point where they will have too much capital. If regulators agree, they will allow the bank’s payouts to climb closer to where they were before the economic crisis hit.
Citigroup Inc. (NYSE:C) and Bank of America Corp (NYSE:BAC) each received a $45 billion bailout and have since repaid it, and their payouts are expected to increase the most out of all the banks. The banks could increase dividend or buy back shares, with either option giving their stock a boost.
Shares of Citigroup (NYSE:C) and Bank of America Corp (NYSE:BAC) both rose as much as 2 percent in trading today. JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Company (NYSE:WFC) each rose less than 1 percent. Also the 24-company KBW Bank Index (INDEXDJX:BKX) jumped almost 1 percent.