Citi's Stephen Trent on the state of the airlines sector, travel demand and M&A outlook
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Yahoo
2 hours ago
- Yahoo
Top US banks boost dividends
This story was originally published on Banking Dive. To receive daily news and insights, subscribe to our free daily Banking Dive newsletter. The biggest U.S. banks are increasing quarterly dividends following the Federal Reserve's Friday release of stress test results. Dividend increases come as the 22 stress-tested banks demonstrated they have sufficient capital to withstand a severe recession and continue lending while remaining above minimum capital requirements. This year's scenario wasn't as harsh as last year's, but given the results, large banks were expected to have room to hike dividends or share repurchases. Since large bank capital levels remain robust, 'investors should continue to expect that any excess capital that cannot be redeployed into growing the companies' core businesses either organically or through acquisition will eventually be returned to shareholders,' RBC Capital Markets analyst Gerard Cassidy wrote Tuesday. More 'aggressive' use of buyback plans should follow once a Basel III capital requirements proposal is finalized, he added. Dividend increases came out to a median of 7.1%, analysts noted. Among the top five biggest U.S. banks, JPMorgan Chase is boosting its dividend to $1.50 per share, from $1.40, for the third quarter. Bank of America said its dividend is increasing by 8%, to $0.28 per share. Citi is hiking its dividend to $0.60 per share, from $0.56. Wells Fargo is boosting its dividend to $0.45, from $0.40. U.S. Bank's dividend will tick up to $0.52 per share, from $0.50. Goldman Sachs logged a 33% increase, with its dividend jumping to $4 per share. PNC is hiking its dividend 6%, to $1.70 per share. Truist said its current dividend of $0.52 per share will remain. Preliminary stress capital buffers telegraphed Tuesday 'confirmed broad improvement in capital requirements, clearing the way for large banks to lower CET-1 targets,' Truist Securities analyst John McDonald wrote. JPMorgan, for example, said its required common equity tier 1 capital ratio dropped to 11.5%, from 12.3%. Most of the banks' stress capital buffers will be at the 2.5% regulatory minimum based on test results; Citi's is highest, at 3.6%. However, most were based on current methodology. 'The big question is whether the Fed proceeds with its proposal to average stress test results over two years, which would reduce the magnitude of improvement in capital requirements by ~half for the group,' McDonald wrote. The Fed will inform banks of their final 2025 stress capital buffer requirements by Aug. 31. The Fed also trimmed Wells Fargo's 2024 stress capital buffer, from 3.8% to 3.7%, and cut Goldman Sachs' 2024 stress capital buffer from 6.2% to 6.1%. Goldman's was reduced last year from 6.4%, after the bank contested the Fed's stress capital buffer requirement. On Tuesday, CEO David Solomon reiterated the desire for stress test changes. 'The Federal Reserve has expressed its intention to institute a more transparent and fair approach to these tests, as it looks to uphold the safety and soundness of our financial system,' Goldman CEO David Solomon said in a news release. 'A more balanced approach to the tests would allow Goldman Sachs to continue to serve our clients' needs, invest in our world-class businesses, and support economic growth. We look forward to continued progress.' At JPMorgan – where the board of directors also approved a new $50 billion share repurchase program – CEO Jamie Dimon expressed similar sentiments. 'We look forward to future proposals from the Federal Reserve on stress test models and scenarios that will increase transparency and address longstanding issues with the current SCB framework,' Dimon said in a news release. The amount and timing of JPMorgan's common share repurchases under the new authorization 'will be subject to various factors,' the bank said. Morgan Stanley, which said it was increasing its dividend to $1 per share, from $0.925, also announced its board re-authorized a $20 billion share repurchase program. 'Given how much de-regulation has picked up steam as a topic between reporting seasons, we expect management teams to field questions on buyback cadence specifically and plans for excess capital deployment generally,' UBS analyst Erika Najarian wrote Tuesday. Recommended Reading Largest banks sail through Fed's stress test Sign in to access your portfolio
CNBC
8 hours ago
- CNBC
What Wall Street is saying about the stronger-than-expected jobs report
Wednesday's private payrolls report from ADP had the Street on edge heading into Thursday's release of the government' nonfarm payrolls number. Investors can breathe easier now. The U.S. economy added 147,000 jobs in June, topping a Dow Jones consensus forecast of 110,000. The unemployment rate also ticked down to 4.1%, while economists had expected an increase to 4.3%. The numbers came one day after ADP reported that U.S. private payrolls decreased by 33,000 jobs last month, raising concern that the government's figures would reflect a much more dire economic picture. Stock futures popped Thursday after 8:30 a.m. ET but quickly pared those gains. S & P 500 and Nasdaq-100 futures were last up around 0.1%, along with those tied to the Dow Jones Industrial Average. Gains were likely capped because the positive report lowers the probability of a Federal Reserve rate cut later this month. Here's what some strategists and investors on Wall Street had to say about the latest U.S. employment report: Joe Gaffoglio, President and CEO at Mutual of America Capital Management: "The June jobs report continues to demonstrate resilience across the labor market, even as certain sectors such as manufacturing continue to lag. The unemployment rate is holding steady at 4.1%, and real average hourly earnings for employees experienced its largest increase of the year." Ian Lyngen, head of U.S. rates at BMO: "Overall, it was a strong set of data that implies the Fed will remain on hold later this month, leaving rate cut expectations focused on the September FOMC meeting." Jeffrey Roach, chief economist at LPL Financial: "If businesses keep expanding payrolls like they've done so far this year, the Fed can comfortably sit in 'wait and see' mode at the upcoming policy meeting. Uncertainty around tariffs and trade have apparently not spooked businesses into shedding workers." Simon Dangoor, head of fixed income macro strategies at Goldman Sachs Asset Management: "Today's stronger jobs report confirms a still resilient U.S. labor market, defying, at least for now, the signs of weakness seen in some leading indicators. The FOMC's conviction that it should hold its wait-and-see stance while it braces for an acceleration in inflation over the summer will only be strengthened. But we still see a path to a resumption of the Fed's easing cycle later in the year should the summer acceleration in inflation prove more modest than expected." Allison Schrager, senior fellow at the Manhattan Institute, in a CNBC " Squawk Box " interview: "I feel like we keep looking for the shoe to drop, but we keep getting good reports. It's not just this employment report, it was also JOLTS. It's also inflation. And for right now, the economy looks pretty strong. It's still keeping on, keeping on, despite all this uncertainty, despite all this tariffs. I guess we can't explain it, but at the very least, I don't see how the Fed could justify cutting rates right now." Eric Merlis, co-head of global markets at Citizens: "The labor market remained resilient in June despite tariff uncertainty and elevated geopolitical concerns. Wages also proved stable and showed no signs of accelerating despite the improvement in the unemployment rate. The stability in labor conditions should give the Fed leeway to maintain its wait-and-see stance until it has greater clarity about how evolving policies may impact the economy." Jeff Schulze, head of economic and market strategy at ClearBridge Investments: "The solid June jobs report confirms that the labor market remains resolute and slams the door shut on a July rate cut. Today's report saw a trifecta of positives that should send the labor bears back into hibernation: a drop in the unemployment rate, a solid beat on headline job creation vs. consensus and positive revisions to the prior two months. Softer average hourly earnings (wage) gains suggest that a wage-price inflationary spiral shouldn't be a near-term concern, setting up something resembling a goldilocks scenario." Bradley Saunders, North America economist at Capital Economics: "Despite a 200,000 increase in the population, the labour force declined by 130,000 last month, suggesting that ICE raids may be keeping immigrants away from work. Paired with the 93,000 gain in the household measure of employment, this meant the unemployment rate fell back to 4.1% – its lowest since the start of the year. We expect this to be a running theme over the next few months, as lower immigration reduces the number of new jobs the economy needs to add in order to keep a lid on the unemployment rate." Thomas Simons, chief U.S. economist at Jefferies: "We had thought that soft payroll data would open the door for a July rate cut, and an increased probability in market pricing for as many as 4 rate cuts in 2025. This data isn't enough to shift the consensus as it provides enough mixed details for investors and policymakers to cherry-pick supports for their pre-existing narratives. We take the overall view that the data is soft, but the market is correct to hold steady on pricing for rate cuts, especially since the CPI data due out on July 15 is likely to be firmer than what we have seen in recent months." Lara Castleton, U.S. head of portfolio construction and strategy at Janus Henderson Investors: "These numbers demonstrate economic resilience despite expectations for slowdowns on the backs of tariff and fiscal uncertainty. While many will not want to believe this solidifies a strong labor market, especially on the backs of a negative ADP print, what this print does solidify is the Fed does not have the data to contemplate a cut in July." Roger Ferguson, former Fed vice chair, on "Squawk Box:" "This is an economy that's driven by the service sector that still seems healthy. So overall, this is a check plus. This is a good labor market report." Chris Zaccarelli, chief investment officer for Northlight Asset Management: "Given the strong jobs numbers along with the extension of tax cuts and potentially higher tariff levels (once the 90-day pause expires), the Fed is much less likely to cut rates this month than many were talking about earlier this week." — CNBC's Alex Harring, Brian Evans, Jesse Pound, Sarah Min, John Melloy and Christina Cheddar-Berk contributed reporting.
CNBC
8 hours ago
- CNBC
Fed can't justify cutting rates right now, says The Manhattan Institute's Allison Schrager
Allison Schrager, The Manhattan Institute, and Wendy Edelberg, The Brookings Institution, joins 'Squawk Box' to discuss the latest jobs report.
