Federal Reserve stress tests: The banks weigh in

Federal Reserve stress tests: A look at reactions from Ally, BB&T, JPMorgan and others

Associated Press

NEW YORK (AP) -- The Federal Reserve on Thursday released the results of its stress tests, the annual checkups it runs to see how big U.S. banks would fare in a severe recession. As a result of the tests, it also tells the banks whether their requests to raise their dividend payments to shareholders or buy back more of their own stock have been approved.

The Fed tested 18 banks. It rejected requests from Ally Financial and BB&T Corp., approved requests from Goldman Sachs Group Inc. and JPMorgan Chase & Co. but asked them to submit new capital plans, and approved requests from the 14 other banks outright. Here's a summary:

— Detroit-based Ally Financial didn't specify what it had asked for. It said that it disagreed with the Fed's assessment and that the Fed should be more transparent about its methods for the tests. The Fed said that Ally wouldn't have adequate capital levels if it proceeded with its capital plans as requested, then were hit by a severe recession.

"Ally Bank continues to be a well-capitalized bank with a leading position in the market," the Detroit-based bank said.

—American Express Co. received approval to raise its quarterly dividend to 23 cents per share from 20 cents, and to buy back up to $4.2 billion of its own stock. The New York company had originally asked to be allowed to buy back $5.7 billion of its own stock, but reined in the request after the Fed released preliminary test results last week and the company decided it might miss the Fed's standards if it didn't change its request.

—Bank of America Corp., based in Charlotte, N.C., received approval to buy back $5 billion of its own stock. It did not ask to raise its quarterly dividend, which will remain at 1 cent per share.

"We believe buying back common shares is the best way to continue to drive value for our shareholders," said CEO Brian Moynihan.

—Bank of New York Mellon Corp. received approval to raise its dividend to 15 cents per share from 13 cents, and to buy back up to $1.4 billion of its own stock.

"We are pleased that our business model generates significant capital that enables us to invest in growth opportunities, strengthen our balance sheet and deliver returns to our shareholders," said CEO Gerald Hassell.

—BB&T Corp. of Winston-Salem, N.C., didn't specify what it had asked for, or what the Fed objected to. The Fed said it had rejected BB&T's request for "qualitative" reasons. It also noted that BB&T had recently changed the way it calculates some assets, which would result in a lower capital ratio than the Fed had predicted. The bank said it would resubmit its plan as soon as possible.

"We remain strongly committed to our shareholders and are proud to have one of the strongest dividend yields and highest payout rates in the industry," said CEO Kelly King.

—Capital One Financial Corp., based in McClean, Va., received approval to raise its quarterly dividend to 30 cents per share from 5 cents. It did not request to buy back shares.

—Citigroup Inc. received approval to buy back $1.2 billion of its own stock. It did not ask to raise its quarterly dividend, which will remain at 1 cent per share.

"We are pleased that Citi will be able to return additional capital to shareholders," said CEO Michael Corbat.

—Cincinnati-based Fifth Third Bancorp received approval to increase its quarterly dividend, but did not give details. It also received permission to buy back $984 million of its own stock.

—Goldman Sachs Group Inc. received approval for its requested actions, but didn't specify what it had asked for. The bank will have to resubmit its capital plan because of the Fed's concerns about "weaknesses" in its plan or planning process.

"We are pleased to continue to have the flexibility to return capital to shareholders," said CEO Lloyd Blankfein.

—JPMorgan Chase & Co. received approval to raise its quarterly dividend to 38 cents per share, up from 30 cents, and to buy back up to $6 billion of its own stock. The bank will have to resubmit its capital plan because of the Fed's concerns about "weaknesses" in its plan or planning process.

"JPMorgan Chase is fully committed to meeting all of the Fed's requirements," said CEO Jamie Dimon.

—KeyCorp, based in Cleveland, received approval to raise its dividend to 5.5 cents per share from 5 cents per share, and to buy back $426 million of its own stock.

—Morgan Stanley received approval to finish buying the remaining 35 percent of Morgan Stanley Smith Barney, the retail brokerage it jointly owns with Citigroup. It did not ask to raise its dividend or buy back stock.

—Pittsburgh-based PNC Financial Services Group Inc. received approval to raise its quarterly dividend, but did not give details. It did not ask to buy back stock, citing its purchase of RBC Bank (USA) last year.

—Regions Financial Corp., based in Birmingham, Ala., received approval to raise its quarterly dividend to 3 cents per share, up from 1 cent, and to buy back $350 million of its own stock.

"The outcome of the capital plan review demonstrates the strength of our company and our transition to a growth posture," said CEO Grayson Hall.

—Boston-based State Street Corp. received approval to buy back $2.1 billion of its own stock.

—Atlanta-based SunTrust Banks Inc. received approval to raise its quarterly dividend to 10 cents per share from 5 cents, and to buy back $200 million of its own stock.

"This marks another step forward for SunTrust, and we remain committed to driving further improvements in our business performance," said CEO William Rogers Jr.

—Minneapolis-based U.S. Bancorp received approval to raise its quarterly dividend to 23 cents per share from 19.5 cents, and to buy back $2.25 billion of its own stock.

—Wells Fargo & Co. received approval to raise its quarterly dividend to 30 cents per share from 25 cents. The San Francisco-based bank also received permission to buy back more of its own stock, but didn't give details.

"We are extremely pleased to be able to reward our shareholders with increased distributions for 2013," said CEO John Stumpf.

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