Morgan Stanley said it will double its dividend and boost the size of its stock buyback program to as much as $12 billion, as a string of US banks outlined plans to return more capital to shareholders after the Federal Reserve eased payment restrictions last week.
The bank was one of several large US lenders to set more generous payments to investors on Monday after last week’s publication of the Federal Reserve’s “stress tests.” The results pushed the US central bank on Thursday to More ease Restrictions on dividends and repurchases imposed on banks during the Covid-19 pandemic
Morgan Stanley is raising its quarterly common stock dividend to 70 cents a share from 35 cents and will buy back up to $2 billion more of its own stock over the next 12 months, having previously committed to a buyback program of up to $10 billion.
Chief Executive Officer James Gorman said the bank “has amassed significant surplus capital over the past several years and now has one of the largest hedge funds in the industry.”
Other large banks also announced higher payments to shareholders but were more conservative than Morgan Stanley. Goldman Sachs raised its dividend to $2 from $1.25, JPMorgan Chase increased its dividend to $1 from 90 cents, and Bank of America increased its dividend to 21 cents from 18 cents.
However, Morgan Stanley was the only large bank to announce an increase in the size of the buyback program. Buying back its stock is more expensive for banks than it was when the Fed imposed pandemic restrictions, because its stock is now more expensive.
Bank shares have been on the rise since September, with many reaching all-time highs on the back of booming trading and deal-making, as well as a bright outlook for the US economy.
Morgan Stanley shares gained 2.5 percent in after-hours trading in New York and Goldman rose 0.6 percent, while shares of other large banks were flat.
“Our capital hierarchy remains the same – invest in and grow our market-leading businesses . . . pay sustainable dividends, and return any remaining surplus capital to shareholders,” said Jamie Dimon, CEO of JPMorgan.
“We are encouraged by the progress made in reducing the capital intensity of our business, as evidenced by the results of recent stress tests,” said David Solomon, CEO of Goldman Bank.
The Fed’s analysis, released last week, concluded that the 23 banks included in the exercise could incur nearly $500 billion in combined losses and still comfortably meet capital requirements.
Additional reporting by Colby Smith in New York