SHARES in JP Morgan Chase soared last night after it became the first bank to say it would boost its dividend after passing the Federal Reserve’s stress tests.
The bank’s stock closed up more than seven per cent at $43.39, making it the highest riser on the Dow Jones, after it said it would raise its quarterly dividend by five cents to 30 cents and buy back up to $15bn (£9.55bn) of shares.
Its core Tier 1 capital ratio came through the tests at 5.9 per cent. The bank has permission from the Fed to purchase $12bn of stock this year although it said its purchases will depend on market conditions.
Chief executive Jamie Dimon hailed the announcement, which came after years of banks slashing or suspending their dividends because they needed to hoard capital following the crisis.
“We are pleased to be in a position to increase our dividend and to establish a new equity repurchase programme. We expect to generate significant capital and deploy that capital to the benefit of our shareholders,” he said.
The Fed had been due to publish its test results tomorrow but rushed them out yesterday night after JP Morgan went public and said the regulator had approved its plans to increase the dividend.
Dimon has long argued that banks will have more capital than they need as losses from the financial crisis are reduced. His bank’s most recently published figures showed fourth-quarter net income of $3.72bn, or 90 cents a share.
Meanwhile Bank of America stock rose 6.3 per cent yesterday to $8.49 on the market’s best day of the year.
Larry Peruzzi, senior equity trader at Cabrera Capital Markets in Boston, said the gains “put us into fourth gear here... The financials have been such a drag on the whole market for the last couple of years.”