Time for banks to resume shareholder dividends?
Several big banks familiar on the California retail scene -- including Wells Fargo, Chase and US Bank -- may soon be deemed strong enough to pay out more of their profits to shareholders.
It will be interesting to see how consumer groups react to the news. The banks have been lobbying heavily to water down restrictions placed upon them in the aftermath of the financial crisis, arguing that new regulations would be so costly that consumers would have to pay more for banking services.
Boosting dividends also could yield big paydays for those running the banks. The New York Times reports that Chase Chief Executive Jamie Dimon would collect $6 million a year.
When the government bailed out the banks as they neared meltdown it demanded certain controls over the institutions, including the power to deny shareholder dividends. Many of the controls stayed in place even after the big banks repaid their investments from the U.S. Treasury.
Most of the big banks pay out only nominal dividends now.
But following reviews of the banks' latest financial-strength reports to the Federal Reserve, which show capital levels rebuilt and billions of dollars in profits, the restraints on dividends are coming off.
Gerard Cassidy, RBC Capital Markets' lead bank analyst, said in a report Thursday that the Fed would provide feedback over the next couple of days to big banks that submitted capital management strategies for review.
As a result, he said investors will probably see dividend increases and possibly share repurchase announcements Monday from select banks, including Wells Fargo & Co., JPMorgan Chase & Co. and US Bancorp.
The others on his list: Bank of New York Mellon Corp., BB&T Corp., Capital One Financial Corp., Fifth Third Bancorp, PNC Financial Services Group and State Street Corp.
Absent are Bank of America Corp. and Citigroup Inc., the most badly battered during the financial crisis of the major banks with a consumer presence.
-- E. Scott Reckard
Photo: Fed Chief Ben S. Bernanke may permit bank dividend payments to resume. Credit: Brendan Smialowski / Getty Images