Federal Reserve Stress Test Results; Citigroup Fails
The Fed released results from its most recent stress tests. Following the release, a majority of the big US banks issued updated capital plans. Below are some highlights:
• Goldman Sachs (NYSE: GS) announced that the Federal Reserve did not object to Goldman Sachs' revised 2014 capital plan. Lloyd Blankfein, Chairman and Chief Executive Officer commented, “Our capital plan provides flexibility to manage our capital resources dynamically and return excess capital to our shareholders.”
• SunTrust Banks (NYSE: STI) also announced that the Federal Reserve has finished its review of its capital plan and fortunately has no objections to the planned capital actions. The capital actions include: A divided hike from $0.10 to $0.20 per share, effective in the second quarter of 2014. A buyback program of no greater than $450 million. William H. Rogers Jr. said, "We are pleased to move ahead with our plans to increase the return of capital to our shareholders through a higher common stock dividend and a larger share repurchase program, We remain committed to driving further improvements in our business performance and delivering long-term value to our shareholders."
• BNY Mellon (NYSE: BK) has also announced that the Federal Reserve had no objections to its plan. BNY Mellon plans to repurchase up to $1.74 billion of common stock. "The Federal Reserve's notice not to object to our 2014 capital plan is consistent with the strength of our business model in stress scenarios, which continues to provide us with the financial flexibility to deploy our capital in the form of dividends and share repurchases," said Gerald L. Hassell, BNY Mellon chairman and chief executive officer.
• American Express (NYSE: AXP) announced that the Federal Reserve did not object its capital plan. The firm plans to hike quarterly dividends by 13 percent and has announced a buy back of up $4.4 billion of common shares in 2014.
• Shares of Citigroup (NYSE: C) were down more than five percent after the Federal Reserve did reject its capital plan. According to USA Today, the Federal Reserve said its rejection of Citigroup's plans "reflects significantly heightened supervisory expectations for the largest and most complex" bank holding companies. Citigroup stated that it had planned on raising its quarterly divided to $0.05 per shares and buy back $6.4 billion of common stock.
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