Top US banks, including JPMorgan Chase, Bank of America, Citigroup, Morgan Stanley, and Goldman Sachs, have announced plans to raise their third-quarter dividends after passing the Federal Reserve's stress test. The stress tests, conducted by the Federal Reserve, reflect the resilience and robustness of US banks, with all 23 banks passing the test and showing ample capital to sustain a severe global recession. The stress tests simulate various catastrophic scenarios to assess how banks would weather major economic downturns and ensure they have capital adequacy ratios above the regulatory minimum. While all banks passed the stress test, some had narrower capital buffers while others had ample spare capital. The results of the stress tests demonstrate the continued regulatory emphasis on maintaining bank robustness and provide confidence in the future of the US banking and finance industry. JPMorgan Chase increased its dividend to $1.25 per share from $1.15 and authorized $30 billion in new share buybacks, effective July 1. Bank of America's dividend will rise to 26 cents per share, Citigroup's to 56 cents per share, Morgan Stanley's to 92.5 cents per share, and Goldman Sachs' to $3 per share. Wells Fargo's dividend will rise to 40 cents per share. The banks' dividend hikes come as they remain conservative on capital due to uncertainty over proposed higher capital requirements under the Basel endgame rules. The banks argue that these requirements could impede their ability to lend and be detrimental to the economy. [f9c8a5f8] [30a4e741] [fc0bac81]
Goldman Sachs has challenged the result of the Federal Reserve's stress test. The bank lodged an appeal with the Federal Reserve, contesting its result in the regulator's most recent stress test. The stress test showed that the tested banks overall saw losses of 17.6% to existing loan balances on credit cards, with Goldman Sachs recording 25.4% in losses. Goldman Sachs had one of the biggest increases in stress capital buffers (SCB) at 94 basis points. CEO David Solomon expressed concern that the increase in SCB does not seem to reflect the strategic evolution of their business and the progress made to reduce stress loss intensity. The appeal by Goldman Sachs challenges the Federal Reserve's assessment of the bank's capital adequacy and resilience. [77bb9168]
In a separate development, Goldman Sachs has released a new index that shows financial stress levels are relatively normal. The index, developed by Goldman Sachs, measures financial stress based on factors such as credit spreads, equity market volatility, and funding costs. The index is currently at a level that suggests financial stress is within a normal range, indicating that the financial system is functioning well and there are no significant signs of distress. The index is updated daily and can be used as a tool to monitor the health of the financial system. [64fa0d0e]