Wall Street’s biggest banks are set to return tens of billions of US dollars to investors after all the lenders passed the US Federal Reserve’s annual test of their ability to withstand market turmoil.
The banks examined showed that they had enough capital to handle a cocktail of surging unemployment, collapsing real-estate prices and a plunge in stocks, the Fed said in a statement on Thursday.
Major companies including JPMorgan Chase & Co, Morgan Stanley and Goldman Sachs Group Inc also faced a made-up market shock that tested the resiliency of their trading operations.
While the terms of the tests were announced in February before US inflation had surged to a 40-year high, the scenarios no longer seem as far-fetched amid mounting concerns of a global economic slowdown. The passing marks effectively give banking giants a green light to return billions of US dollars to investors in dividends and share buybacks.
“Banks continue to have strong capital levels, allowing them to continue lending to households and businesses during a severe recession,” the Fed said in the statement.
The Fed said the more than 30 lenders it examined were able to remain above their minimum capital requirements during the hypothetical economic meltdown, which would have caused them total projected losses of US$612 billion.
Lenders use the tests to assess how much capital they can afford to dole out to investors without falling below the amount they are required to hold as a cushion. If a firm breaches its so-called stress capital buffer at any point in the year following the exams, the Fed can apply sanctions, including restrictions on capital distributions and bonus payments.
With their results in hand, banks can announce their payout plans starting on Monday. Estimates by Barclays PLC analysts indicate that JPMorgan is set to lead the way with US$18.9 billion in combined dividends and share buybacks, followed by Bank of America Corp and Wells Fargo & Co with US$15.5 billion and US$15.3 billion.
In all, US banking giants are set to return US$80 billion to shareholders this year, according to data compiled by Bloomberg based on the projections.
“The nation’s largest banks remain well-positioned to absorb a range of potential economic shocks while continuing to support their customers, clients and communities,” American Bankers Association president Rob Nichols said in a statement. “The industry’s strong balance sheets and high capital levels ensure banks can make the loans that drive our economy even if they face substantial headwinds.”
Last year, dividend payouts by the nation’s six largest lenders rose by almost half after the country’s largest banks amassed mountains of excess capital during the pandemic.
Morgan Stanley alone doubled its quarterly payout while also announcing as much as US$12 billion in stock buybacks.
This year’s stress tests included “a severe global recession accompanied by a period of heightened stress in commercial real estate and corporate debt markets,” according to the Fed’s Web site.
In a sign of the COVID-19 pandemic’s impact, the hypothetical downturn “is amplified by the prolonged continuation of remote work, which leads to larger commercial real estate price declines that, in turn, spill over to the corporate sector and affect investor sentiment.”
The scenario featured a peak US unemployment rate of 10 percent, a real GDP decline of 3.5 percent from the end of last year and a 55 percent drop in equity prices.
It also incorporates a sharp decline in inflation to an annual rate of 1.25 percent in the third quarter of this year on higher unemployment and lower demand.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last