Banking, finance, and taxes

10 Top Banks to Repurchase $125 Billion in Stock Over Next 12 Months

Jon C. Ogg

Published: June 28, 2019 11:30 am

Last Updated: January 30, 2020 7:06 pm

The Federal Reserve has released its annual Comprehensive Capital Analysis and Review (CCAR). This exercise includes a quantitative assessment for the top banks that operate in the United States. The CCAR is effectively the stress test that banks must pass in order to get regulatory approvals to pay out their dividends and to spend their capital on stock buybacks and other repurchases.

For the 2019 CCAR, almost all the firms passed with flying colors. 24/7 Wall St. has tallied up the releases from the top 10 companies classified as bank holding companies and depository institutions rather than focusing on all 18.

It turns out that these 10 top banks have been approved to repurchase almost $125 billion worth of stock, which compares with a combined market capitalization of $1.326 trillion. Without worrying about any rounding of the figures, that is close to 9.4% of the outstanding common shares that may get repurchased from July 1, 2019, to June 30, 2020.

We have summarized each major bank’s dividend announcement, most of which are hikes, and summarized each common stock buyback authorization. Once these companies commit to the dividend, they will pay it, but investors have to consider that not all companies actually spend every penny that has been approved for share repurchases.

Also worth consideration is that these numbers will slightly change as share prices rise or fall and as the total number of outstanding shares comes down. That said, none of the major banking holding companies received any objection from the Federal Reserve on quantitative or qualitative grounds in the 2019 CCAR.

As far as why the banks are so aggressive with shareholder returns, investors need to consider that banks have limited options of what they can do with their excess capital. Most of these bank holding companies (not all of which are true banks) would face regulatory scrutiny if they tried to make a sizable acquisition. And the very top banks would be barred from making any acquisition for additional deposits due to the old 10% threshold of total national deposits by banks and thrifts. Regionally, the top banks may have far greater market share than 10% on a state-by-state level.

Here is a tally of the top banks with common stock buybacks that have been approved from the third calendar quarter of 2019 through the end of the second calendar quarter of 2020. A table for supporting data has been included at the end.

Bank of America
> Share Buybacks: $30.9 billion
> Percentage of Market Cap: 11.4%

Bank of America Corp. (NYSE: BAC) said that its board of directors approved plans for the company to return as much as $37 billion to common stockholders over the next four quarters in dividends and common stock repurchases. The bank plans to increase its quarterly common dividend by 20% to $0.18 per share. It also has been authorized to repurchase roughly $30.9 billion in its common shares, and it would include approximately $0.9 billion in repurchases to offset shares awarded under employee stock options during the same period.

BNY Mellon
> Share Buybacks: $3.9 billion
> Percentage of Market Cap: 9.4%

Bank of New York Mellon Corp. (NYSE: BK) approved the repurchase of up to $3.94 billion of its common stock for the four-quarter period, an increase of approximately 20% from the prior four-quarter period. BNY Mellon also intends to increase its quarterly cash dividend by roughly 11%, from $0.28 to $0.31 per common share.

Capital One
> Share Buybacks: $2.2 billion
> Percentage of Market Cap: 5.2%

Capital One Financial Corp. (NYSE: COF) did not receive objections to its adjusted capital plan. The company expects to maintain its quarterly dividend of $0.40 per common share, and its board of directors has authorized the repurchase of up to $2.2 billion worth of common stock.

Citigroup
> Share Buybacks: $17.1 billion
> Percentage of Market Cap: 10.8%

Citigroup Inc. (NYSE: C) received no objection to its planned capital actions. These included increasing the common stock dividend from $0.45 to $0.51 per share and a common stock repurchase program of up to $17.1 billion.

Goldman Sachs
> Share Buybacks: $7.0 billion
> Percentage of Market Cap: 9.6%

Goldman Sachs Group Inc. (NYSE: GS) did not receive objections to its CCAR 2019 capital plan. These include up to $8.8 billion of capital returns over the four-quarter period, up to $7.0 billion in common stock repurchases and a dividend hike on the common shares from $0.85 to $1.25 apiece.

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JPMorgan Chase & Co. (NYSE: JPM) confirmed that the Federal Reserve Board did not object to its capital plan for 2019. J.P. Morgan Chase’s board intends to increase the quarterly common stock dividend to $0.90 per share from the current $0.80 payout per share. It further authorized gross repurchases of up to $29.4 billion in the four-quarter period for new common equity repurchases.

Morgan Stanley
> Share Buybacks: $6.0 billion
> Percentage of Market Cap: 8.2%

Morgan Stanley (NYSE: MS) received no objection to its 2019 capital plan, which includes the repurchase of up to $6.0 billion of outstanding common shares for the four-quarter period, an increase from $4.7 billion for the comparable similar period in the 2018 capital plan. Morgan Stanley also will raise its quarterly common stock dividend to $0.35 per share from the current $0.30.

State Street
> Share Buybacks: $2.0 billion
> Percentage of Market Cap: 9.6%

State Street Corp. (NYSE: STT) was approved to increase its dividend and a new common stock purchase program. Its capital plan proposes an increase to the quarterly dividend to $0.52 per share from $0.47 on the common stock. Additionally, its board has approved a new common stock purchase program of up to $2.0 billion.

US Bancorp
> Share Buybacks: $3.0 billion
> Percentage of Market Cap: 3.6%

U.S. Bancorp (NYSE: USB) will recommend in July that its board of directors approve a quarterly dividend increase to $0.42 per common share (up 13.5%), and this is expected to increase the annual dividend equivalent to $1.68 per common share. It also has approved a four-quarter authorization to repurchase up to $3.0 billion of its common stock.

Wells Fargo
> Share Buybacks: $23.1 billion
 Percentage of Market Cap: 9.6%

Wells Fargo & Co. (NYSE: WFC) expects to increase its third-quarter dividend to $0.51 per common share from $0.45. The plan also includes common stock repurchases of up to $23.1 billion for the four-quarter period under the plan. In addition, Wells Fargo’s board of directors may consider redemptions or repurchases of other capital securities as part of the plan.

After you add all these up, the grand tally comes to $124.64 billion, without factoring in any rounding errors. The combined market cap of $1.3264 trillion implies that these 10 top bank holding companies alone will be repurchasing about 9.4% of their outstanding common shares over the next 12 months.

The table below shows the billions of dollars these banks plan to spend on buybacks and dividends, as well as the market capitalization of each bank. The outstanding shares used to tally the data came from Nasdaq quote pages. Again, these numbers are static based on closing data from June 27, 2019, and the numbers will change slightly as the share counts change.

Note: All figures are in billions.