Chillin' out till it needs to be funded
Citibank, JP Morgan and others excluding Bank of America get eager to receive results of the Fed stress Test that will alow Citi to increase its dividend from the notional 1c to “significantly increase bank’s return of cash” to shareholders. JP Morgan has already opened two buy back programs of $10 bln and $15 bln and according to the FT dividends plus buybacks would add to 70% of the Bank’s 2012 profits a s well. More than $10 bln of buybacksare available to JP Morgan under existing programs.
Payout ratios at banks will double but Trader/Brokers will look to consolidate their balance sheets during these two years. (Barclays Capital) Though botht trader/Brokers and Bank of America will pass the test, Bank of America has avowed not to risk getting another denial from the Treasury because of its residual stae in the bank. The government agencies have embargoed BofA from paying dividends, while Cit has returned all the cash due and wants to reward investors with cash to boost share performance.
Many institutional Investors rely on dividend income in their portfolios esp as banks would want to be part of longer term investor portfolios again as well as get into some profitable hedge fund strategies after their rout cause many an industry heartburn in 2011. Credit Suisse, BarCap and RBC Cap Markets are among those looking for payouts to double from 23% to 47% in 2012 as a result of the CCAR review (Stress Tests) that report on March 15 with response of Capital to scenarios such as 13% unemployment and a European Bank collapse.