The Strategist

Stress tests increased market value of US banks

06/30/2017 - 11:29

The market value of the largest US banks has grown by more than $ 40 billion after the Federal Reserve of the United States published annual results of stress tests. The audit showed that the credit institutions are able to significantly increase the amount of dividends for holders of shares.

Joe Mabel
Joe Mabel
The market price of Wells Fargo securities increased by 4.1%, Citigroup shares went up by 3.8% at the auction in New York. KBW Nasdaq Bank's banking index also showed the strongest growth since April this year.

"The results significantly exceeded our estimates, besides, the Fed, following the results of stress tests, allowed all banks to repay the funds to shareholders", the expert at Compass Point Research & Trading LLC wrote. 

All 34 system-forming banks underwent annual stress tests of the Fed. This happened for the first time since the testing began in 2011. And the Federal Reserve System informed the country's largest banks that they have more than enough capital and they hastened to announce large-scale payments to their shareholders, writes the agency Bloomberg. American banks led by JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. presented ambitious plans to increase dividends and buy back their own shares.

Earlier it was reported that JPMorgan, the largest US creditor, said it was increasing its quarterly dividend by 12% and could raise its share buyback to $ 19.4 billion in the next 12 months - approximately 90% more than in the previous year. Citigroup plans to double dividends and can redeem its shares for up to $ 15.6 billion. Bank of America raised its dividend by 60% and intends to buy back shares worth up to $ 12 billion.

The results of the first round of stress tests last week showed that all 34 systemically important banks in the US have sufficient capital to continue to lend to businesses and households even in times of crisis. Testing is part of the Dodd-Frank reforms that began after the crisis. The reform is aimed at raising the level of banks' capital to counter new crises.