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Wells Fargo (WFC) Hikes Dividend by 17%, To Continue Buybacks
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After passing the 2023 Comprehensive Capital Analysis and Review (“CCAR”) stress test process, Wells Fargo & Company (WFC - Free Report) announced expecting its Stress Capital Buffer (SCB) to decrease to 2.9%.
The Federal Reserve Board will, however, publish the company’s final SCB by Aug 31, 2023.
With a lower SCB, a company typically has higher flexibility to deploy capital in share buybacks and dividends. Accordingly, WFC expects to increase its third-quarter 2023 common stock dividend by 17% to 35 cents per share from 30 cents. This is conditional on approval by its board of directors at its regularly scheduled meeting in July.
Last year, Wells Fargo increased its dividend for third-quarter 2022 to 30 cents per share, indicating a 20% sequential hike following the annual stress test.
Also, over the four-quarter period beginning third-quarter 2023 through second-quarter 2024, WFC has the capacity to repurchase shares. Share repurchase activity will be assessed as part of the company’s internal capital adequacy framework. In first-quarter 2023, it repurchased 86.4 million shares and had 164 million shares remaining under the repurchase authorization.
Per CEO Charlie Scharf, “This year’s CCAR stress test affirmed that Wells Fargo remains in a strong capital position, reflecting the value of our franchise and benefits of our operating model.”
Markedly, WFC continues to build on its deposit base, which witnessed a three-year (ended 2022) compound annual growth rate (CAGR) of 1.5%. The metric declined in the first quarter of 2023. While the pace of deposit growth is likely to continue moderating in the near term, the considerable strength in the consumer business and commercial banking segments will likely support the deposit balance in the upcoming period. This is likely to strengthen the bank’s liquidity position.
Shares of WFC have gained 3.3% in the year-to-date period against the industry’s fall of 5.5%.
Other Banks With Enhanced Capital Deployment Plans
Some other large U.S. banks, including JPMorgan (JPM - Free Report) and The Goldman Sachs Group, Inc. (GS - Free Report) , said on Friday that they would return more cash to shareholders after the clearance of the 2023 stress test.
JPM, the largest U.S. bank, intends to raise the quarterly dividend by 5% to $1.05 per share. This follows no change in dividend payout last year.
Likewise, GS announced plans to hike the dividend from the current $2.50 per share to $2.75. Notably, the stress test determined GS’ SCB at 5.5%, resulting in a minimum Standardized Common Equity Tier 1 ratio requirement of 13%.
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Wells Fargo (WFC) Hikes Dividend by 17%, To Continue Buybacks
After passing the 2023 Comprehensive Capital Analysis and Review (“CCAR”) stress test process, Wells Fargo & Company (WFC - Free Report) announced expecting its Stress Capital Buffer (SCB) to decrease to 2.9%.
The Federal Reserve Board will, however, publish the company’s final SCB by Aug 31, 2023.
With a lower SCB, a company typically has higher flexibility to deploy capital in share buybacks and dividends. Accordingly, WFC expects to increase its third-quarter 2023 common stock dividend by 17% to 35 cents per share from 30 cents. This is conditional on approval by its board of directors at its regularly scheduled meeting in July.
Last year, Wells Fargo increased its dividend for third-quarter 2022 to 30 cents per share, indicating a 20% sequential hike following the annual stress test.
Also, over the four-quarter period beginning third-quarter 2023 through second-quarter 2024, WFC has the capacity to repurchase shares. Share repurchase activity will be assessed as part of the company’s internal capital adequacy framework. In first-quarter 2023, it repurchased 86.4 million shares and had 164 million shares remaining under the repurchase authorization.
Per CEO Charlie Scharf, “This year’s CCAR stress test affirmed that Wells Fargo remains in a strong capital position, reflecting the value of our franchise and benefits of our operating model.”
Markedly, WFC continues to build on its deposit base, which witnessed a three-year (ended 2022) compound annual growth rate (CAGR) of 1.5%. The metric declined in the first quarter of 2023. While the pace of deposit growth is likely to continue moderating in the near term, the considerable strength in the consumer business and commercial banking segments will likely support the deposit balance in the upcoming period. This is likely to strengthen the bank’s liquidity position.
Shares of WFC have gained 3.3% in the year-to-date period against the industry’s fall of 5.5%.
Image Source: Zacks Investment Research
WFC currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Other Banks With Enhanced Capital Deployment Plans
Some other large U.S. banks, including JPMorgan (JPM - Free Report) and The Goldman Sachs Group, Inc. (GS - Free Report) , said on Friday that they would return more cash to shareholders after the clearance of the 2023 stress test.
JPM, the largest U.S. bank, intends to raise the quarterly dividend by 5% to $1.05 per share. This follows no change in dividend payout last year.
Likewise, GS announced plans to hike the dividend from the current $2.50 per share to $2.75. Notably, the stress test determined GS’ SCB at 5.5%, resulting in a minimum Standardized Common Equity Tier 1 ratio requirement of 13%.