Wall Street banks pick up buyback pace ahead of key Fed tests
The biggest US banks haven’t waited for this week’s stress tests to signal optimism about their capital levels.
The six largest lenders bought back more than $14 billion of stock in the first quarter, a 73% jump from the meager pace in last year’s second half. The banks had slowed their buybacks in the face of new capital-rule proposals, but in recent months all signs have pointed to those getting watered down.
The annual exam from regulators — with results set to be released Wednesday afternoon — tends to set the tone on how aggressive banks are in returning capital to shareholders through dividends and buybacks. In 2022, for example, harsher-than-anticipated test results caused firms to slam the brakes on repurchasing shares. But the past 12 months have been less about the current capital rules and more about where they’re headed.
The Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency released a plan last year for tighter capital rules on banks, known as Basel III Endgame, which they said would require a 19% increase for the largest firms. In response, Wall Street launched a fierce lobbying campaign against the proposal, and Fed Chair Jerome Powell said earlier this year that the plan was in for “broad and material changes.”
The Fed has shown the other regulators a three-page document of possible revisions that would significantly soften the new requirements, with could lead to a capital increase of as little as 5%, Bloomberg News reported Monday. Officials haven’t reached an agreement, and the Fed said in a statement that it’s reached “no decisions on timing, process or substance.”
The first quarter put the six banks on pace for $58 billion in buybacks this year, a
Read more on investmentnews.com
