US Banks Expand Share Buy-Back Plans

A week after the FED announced that 33 of 34 major US banks had passed their financial stress-tests, the banks have released their revised share buyback and dividend plans.

Analysts had estimated that positive stress-test results would open the way for banks to boost dividends and share buybacks by up to 25%, which could translate to about $30 billion back to shareholders through higher dividends and share prices.

Some of the specific plans include Citi-Group buying back up to $15 billion in shares and increasing their dividend to 32 cents per share, and JP Morgan buying back up to $19 billion in shares and lifting their dividend from 50 cents to 56 cents.

While these announcements were bullish for the share prices today, a longer-term valuation question is: How are the major US banks going to maintain these share and dividend levels?

Against a back drop of lower loan creation, thinner margins and increased bad loan provisions, we’ll track the recent price action and see if the bounce from the recent lows will be sustainable.

JP Morgan






JP Morgan Slips 1% After Q1 Earnings Report

Shares of JP Morgan fell over 1% today as their Q1 earnings report included a sharp increase in write-downs.

The company reported earnings of $1.65 per share, which was up from an adjusted $1.35 reported a year ago and higher than the street estimates of $1.52.

However, concerns emerged in the bank’s consumer group, where credit costs surged to $1.4 billion, up almost $400 million from Q4 2016. This expense was driven by higher credit card charge offs.

As the other major US banks report their earnings next week, we will watch for similar write downs as a source of selling pressure.

JPM shares closed at $84.40, which is over 11% lower than the $94.00 high posted on March 1st.