The Federal Reserve has just finished the second round of stress tests this year for financial institutions. The results were published on Wednesday and show incredible outcomes. Citigroup together with other thirty major banks in the United States cleared this hurdle and managed to increase their dividends and buybacks.
Stress Tests Showed that All Banks Can Pay for the Next Four Quarters 100%
All these major banks have recently proved that they have the necessary resources to overcome cruel financial conditions. This second part of stress tests this year bears great significance as it proves that these institutions created ideal capital buffers and took risk management to a whole new level.
Republican Fed Governor Jerome Powell is in charge of regulations for the U.S. central bank. He claimed that all these years of stress tests were fruitful in the end. Largest banks in America grew more ambitious to build their activity around healthy capital levels and adopt stronger capital planning strategies than ever before.
As a consequence, all the parties that passed the tests showed that they could cover their projected net income for the next four quarters completely. By comparison, this capacity was only at 65% based on last year’s results. This marks 2017 as the first year since the 2008 financial crisis when banks will be able to pay back shareholders as much money as they produce. This is a performance for which banks worked for years to attain.
Bank of America Will Increase Dividends by 60%
These favorable conditions will allow the banks to cover the biggest dividends in the last nine years. Shareholders jubilate as they got exactly what they hoped for from a new Trump administration. Therefore, banks are quickly adapting to their refreshed responsibilities. For instance, Bank of America is going to increase the dividend for the quarterly common stock by 60% which will bring a share to 12 cents.
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