James Gorman, chairman and chief executive officer of Morgan Stanley, appears on CNBC’s Squawk Box at the 2020 World Economic Forum in Davos, Switzerland on Jan. 22nd, 2020.
Adam Galici | Getty Images
(This is a breaking story. Check back for updates.)
Morgan Stanley, the Wall Street powerhouse, doubled its quarterly dividend and announced a new $12 billion stock repurchase plan.
The bank said Monday in a press release that its dividend will jump to 70 cents a share starting in the third quarter, and it would buy up to $12 billion of its own stock through June 2022. Shares of Morgan Stanley popped 4%.
“Morgan Stanley has accumulated significant excess capital over the past several years and now has one of the largest capital buffers in the industry,” CEO James Gorman said in the release. “The action taken by the Board reflects a decision to reset our capital base consistent with the needs we have for our transformed business model.”
Meanwhile, larger rival JPMorgan Chase boosted its dividend to $1 per share from 90 cents, according to the bank. JPMorgan said it “continues to be authorized” to tap an existing share repurchase plan.
Last week, the Federal Reserve announced that all 23 banks that took the 2021 stress test passed, with the industry “well above” required capital levels in a hypothetical economic downturn. While the institutions would post $474 billion in losses in this scenario, loss-cushioning capital would still be more than double the minimum required levels.
The test was a key milestone for American banks, coming in the year after a global pandemic threatened to put the industry through a real-life stress test. After playing a key role in the 2008 financial crisis, banks were forced to undergo the annual ritual, and had to ask regulators for permission to boost dividends and repurchase shares.
Now banks will reclaim flexibility in how they choose to dole out capital in the form of dividends and buybacks. As long as they maintain capital levels above something called the stress capital buffer, banks can make more of their own decisions. The new regime was supposed to start last year, but the pandemic intervened.
While analysts have said bank investors have mostly factored in higher payouts from banks, bigger-than-expected capital plans may still be viewed favorably. Banks are expected to release comments on their plans starting Monday at 4:30 pm.
This story is developing. Please check back for updates.
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