Big bank stocks took off after the Fed gave the nod to some long-awaited dividend hikes.
JPMorgan Chase (jpm) was the first out of the gate, boosting its quarterly payout to a quarter from a nickel and setting up a $15 billion stock buyback plan to boot. Wells Fargo (wfc) and U.S. Bancorp (usb) quickly followed suit. Shares of all three rose 3% or so.
The rally came after the Federal Reserve said Friday it completed its latest stress tests of the 19 biggest U.S. lenders.
The idea was to make sure that all the banks have enough capital on hand to deal with another shock to the economy or the financial markets, which is seeming like a pretty good call given the stunning developments (riots, oil spike, earthquake, nuclear crisis) of the past month.
In a break from how it handled the last stress test, the Fed didn’t disclose the findings of the Comprehensive Capital Analysis and Review, or CCAR. But it said it will be letting the banks know how they fared.
We are learning who aced the test by seeing who announces increased dividend payments. As the Fed said:
Bank of America (bac) is a bank worth watching here. It has been posturing to the effect that it is going to raise its dividend too — even though there is considerable doubt about the health of its mortgage book. Presumably it will be among the banks getting middling marks on the test and being told to study harder and buckle down next time.
The Fed’s statement even makes allowances for those who don’t quite make the dividend grade:
So no one should get their feelings hurt if they can’t raise the dividend just yet. And if BofA does come out hiking? Well, that will afford us yet another chance to scratch our heads and wonder just what the point of bank regulators actually is.
Also on Fortune.com:
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