U.S. financial institutions increase their dividend payments
In a recent development, several major U.S. banks have announced dividend increases, demonstrating their financial strength and resilience. Notably, Citi, Bank of America, PNC, and Wells Fargo are among the banks raising their dividends. The median increase stands at 7.1%.
Citi is hiking its dividend to $0.60 per share, while Bank of America's dividend is increasing by 8%, to $0.28 per share. PNC is hiking its dividend 6%, to $1.70 per share, and Wells Fargo is boosting its dividend to $0.45 per share. JPMorgan Chase is boosting its dividend to $1.50 per share for the third quarter, and U.S. Bank's dividend will tick up to $0.52 per share.
Meanwhile, Goldman Sachs has logged a significant 33% increase, with its dividend jumping to $4 per share. Morgan Stanley has also increased its dividend to $1 per share and re-authorized a $20 billion share repurchase program.
These dividend increases come as the Federal Reserve has released stress test results for the biggest U.S. banks, showing that all 22 major banks remain above minimum capital requirements under stress scenarios. This indicates that the banks have demonstrated they have sufficient capital to withstand a severe recession.
The Federal Reserve has been proposing a reform to average stress test results over two years when setting stress capital buffers (SCBs) for large U.S. banks. The goal is to reduce capital requirement volatility from year to year. While the Fed is still in the rulemaking process and has not finalized the reform, there is general industry support for this averaging approach.
If implemented, this reform is expected to reduce unexpected SCB swings and improve capital requirement stability for large U.S. banks. Additionally, it could potentially improve alignment with actual risk profiles by better reflecting ongoing risk and avoiding capital add-ons driven by short-term or atypical stress impacts.
However, some argue that averaging is only a first step and further transparency and structural changes in stress testing models and disclosures are needed for more effective capital planning.
In a news release, Goldman Sachs' CEO, David Solomon, stated the need for a more balanced approach to stress tests. Similarly, Jamie Dimon, CEO of JPMorgan Chase, expressed similar sentiments regarding stress test changes. UBS analyst Erika Najarian expects management teams to field questions on buyback cadence and plans for excess capital deployment in light of these developments.
A recent article by Rajashree Chakravarty titled "Largest banks sail through Fed's stress test" on June 30, 2025, further highlights this positive outlook for the banking sector. The Fed intends to institute a more transparent and fair approach to stress tests, which could further bolster investor confidence in the sector.
In conclusion, the U.S. banking sector appears to be in a strong position, with major banks increasing their dividends and passing the Fed's stress tests with flying colours. The proposed reform to average stress test outcomes over two years, if implemented, could provide additional stability and predictability to capital planning for these banks.
Investors may find opportunities in the business sector, considering the rising dividends from major U.S. banks like Citi, Bank of America, PNC, and Wells Fargo, among others. The proposed reform by the Federal Reserve to average stress test results over two years could further improve capital requirement stability for these banks, potentially attracting more investing in the finance industry.
