Latest news with #VivekJuneja
Business Times
3 days ago
- Business
- Business Times
Big US banks expected to ace stress tests, boost dividends
[NEW YORK] The biggest US lenders are expected to clear the Federal Reserve's annual health check this year, showing they have ample capital that can be used to boost dividends, analysts said. The results of the central bank's so-called 'stress tests' on Friday (Jun 27) will determine how much cash lenders would need to hold to withstand a severe economic downturn. A less strenuous methodology this year means banks will probably perform better and return more money to investors via dividends and share buybacks, analysts said. The yearly exercise, introduced following the 2007-to-2009 financial crisis, is integral to capital planning for the 22 large lenders being tested. It is also used by banks to determine how much in dividends can be given to shareholders. 'With the improved regulatory tone, hopes are high for some reduction in capital requirements... driven by less harsh stress tests,' said Vivek Juneja, an analyst at JPMorgan. Given banks' high capital levels, he anticipated they would increase dividends by an average of about 3 per cent and boost share repurchases. Tepid loan growth and a favourable regulatory environment will make banks more flexible as they manage capital and grow dividends. However, banks may stay cautious with capital. 'Despite an improved outlook for capital return, we continue to expect management teams to remain somewhat conservative nearer-term given ongoing tariff, economic uncertainty and the timing and the magnitude of regulatory reform,' analysts from Raymond James said in a report. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The scenarios for this year's stress test are also expected to be less onerous versus last year. 'It includes a smaller decline in US real GDP, a smaller rise in unemployment rate, smaller declines in short/long-end rates and other improvements including less aggressive housing and equity pricing declines,' analysts at Jefferies wrote in a note. In more good news for banks, the tests are expected to only become more manageable for banks going forward. In April, the Fed kicked off a sweeping effort to overhaul the tests, which would include, in future years, averaging results to reduce volatility and giving banks more visibility into how they are graded by the Fed. 'We view this as a major positive that will help banks and regulators better align on methodology between internal and Fed-run stress tests, with the output being less of a black box,' said Betsy Graseck, an analyst at Morgan Stanley. Changes in the process could begin as early as this year, she added. Wall Street firms could also see some relief in their stress capital buffers, an additional layer of capital that the Fed requires large banks to hold on top of minimum capital requirements. Goldman Sachs and Morgan Stanley, which saw their buffers increased last year, are 'poised for improvements this year,' the analysts at Jefferies wrote. Meanwhile, Citibank and M&T Bank could see a slight uptick in their capital requirements, said analysts at Keefe, Bruyette & Woods. Overall, analysts expect the regulatory environment for big banks to be more benign under the second administration of US President Donald Trump. 'Stress tests are likely to be less stressful in Trump 2.0,' analysts at Raymond James said. REUTERS
Yahoo
3 days ago
- Business
- Yahoo
Big US banks expected to ace stress tests, boost dividends
By Nupur Anand NEW YORK (Reuters) -The biggest U.S. lenders are expected to clear the Federal Reserve's annual health check this year, showing they have ample capital that can be used to boost dividends, analysts said. The results of the central bank's so-called 'stress tests' on Friday will determine how much cash lenders would need to hold to withstand a severe economic downturn. A less strenuous methodology this year means banks will probably perform better and return more money to investors via dividends and share buybacks, analysts said. The yearly exercise, introduced following the 2007-2009 financial crisis, is integral to capital planning for the 22 large lenders being tested. It is also used by banks to determine how much in dividends can be given to shareholders. "With the improved regulatory tone, hopes are high for some reduction in capital requirements... driven by less harsh stress tests," said Vivek Juneja, an analyst at JPMorgan. Given banks' high capital levels, he anticipated they would increase dividends by an average of about 3% and boost share repurchases. Tepid loan growth and a favorable regulatory environment will make banks more flexible as they manage capital and grow dividends. However, banks may stay cautious with capital. "Despite an improved outlook for capital return, we continue to expect management teams to remain somewhat conservative nearer-term given ongoing tariff, economic uncertainty and the timing and the magnitude of regulatory reform," analysts from Raymond James said in a report. The scenarios for this year's stress test are also expected to be less onerous versus last year. "It includes a smaller decline in U.S. real GDP, a smaller rise in unemployment rate, smaller declines in short/long-end rates and other improvements including less aggressive housing and equity pricing declines," analysts at Jefferies wrote in a note. In more good news for banks, the tests are expected to only become more manageable for banks going forward. In April, the Fed kicked off a sweeping effort to overhaul the tests, which would include, in future years, averaging results to reduce volatility and giving banks more visibility into how they are graded by the Fed. "We view this as a major positive that will help banks and regulators better align on methodology between internal and Fed-run stress tests, with the output being less of a black box," said Betsy Graseck, an analyst at Morgan Stanley. Changes in the process could begin as early as this year, she added. Wall Street firms could also see some relief in their stress capital buffers, an additional layer of capital that the Fed requires large banks to hold on top of minimum capital requirements. Goldman Sachs and Morgan Stanley, which saw their buffers increased last year, are "poised for improvements this year," the analysts at Jefferies wrote. Meanwhile, Citibank and M&T Bank could see a slight uptick in their capital requirements, said analysts at Keefe, Bruyette & Woods. Overall, analysts expect the regulatory environment for big banks to be more benign under the second administration of U.S. President Donald Trump. "Stress tests are likely to be less stressful in Trump 2.0," analysts at Raymond James said.
Reuters
3 days ago
- Business
- Reuters
Big US banks expected to ace stress tests, boost dividends
NEW YORK, June 24 (Reuters) - The biggest U.S. lenders are expected to clear the Federal Reserve's annual health check this year, showing they have ample capital that can be used to boost dividends, analysts said. The results of the central bank's so-called 'stress tests' on Friday will determine how much cash lenders would need to hold to withstand a severe economic downturn. A less strenuous methodology this year means banks will probably perform better and return more money to investors via dividends and share buybacks, analysts said. The yearly exercise, introduced following the 2007-2009 financial crisis, is integral to capital planning for the 22 large lenders being tested. It is also used by banks to determine how much in dividends can be given to shareholders. "With the improved regulatory tone, hopes are high for some reduction in capital requirements... driven by less harsh stress tests," said Vivek Juneja, an analyst at JPMorgan. Given banks' high capital levels, he anticipated they would increase dividends by an average of about 3% and boost share repurchases. Tepid loan growth and a favorable regulatory environment will make banks more flexible as they manage capital and grow dividends. However, banks may stay cautious with capital. "Despite an improved outlook for capital return, we continue to expect management teams to remain somewhat conservative nearer-term given ongoing tariff, economic uncertainty and the timing and the magnitude of regulatory reform," analysts from Raymond James said in a report. The scenarios for this year's stress test are also expected to be less onerous versus last year. "It includes a smaller decline in U.S. real GDP, a smaller rise in unemployment rate, smaller declines in short/long-end rates and other improvements including less aggressive housing and equity pricing declines," analysts at Jefferies wrote in a note. In more good news for banks, the tests are expected to only become more manageable for banks going forward. In April, the Fed kicked off a sweeping effort to overhaul the tests, which would include, in future years, averaging results to reduce volatility and giving banks more visibility into how they are graded by the Fed. "We view this as a major positive that will help banks and regulators better align on methodology between internal and Fed-run stress tests, with the output being less of a black box," said Betsy Graseck, an analyst at Morgan Stanley. Changes in the process could begin as early as this year, she added. Wall Street firms could also see some relief in their stress capital buffers, an additional layer of capital that the Fed requires large banks to hold on top of minimum capital requirements. Goldman Sachs (GS.N), opens new tab and Morgan Stanley (MS.N), opens new tab, which saw their buffers increased last year, are "poised for improvements this year," the analysts at Jefferies wrote. Meanwhile, Citibank (C.N), opens new tab and M&T Bank (MTB.N), opens new tab could see a slight uptick in their capital requirements, said analysts at Keefe, Bruyette & Woods. Overall, analysts expect the regulatory environment for big banks to be more benign under the second administration of U.S. President Donald Trump. "Stress tests are likely to be less stressful in Trump 2.0," analysts at Raymond James said.
New York Post
4 days ago
- Business
- New York Post
Northern Trust says it's ‘fully committed to remaining independent' after report of possible BNY merger
Northern Trust on Monday shut down any talk of a possible merger with Bank of New York Mellon. 'I can tell you that Northern Trust is fully committed to remaining independent and continuing to deliver long-term value to our stakeholders, as we have for the past 135 years,' a spokesperson for the bank told The Post in a statement. That pushback came a day after the Wall Street Journal reported that BNY had approached Northern Trust last week to express interest in a deal. Advertisement Bank of New York Mellon reportedly approached Northern Trust last week to express interest in a deal. REUTERS The chief executives of both banks had at least one conversation, but there was no specific offer on the table, sources told the Journal. BNY was considering whether to submit a formal bid, according to the report. BNY did not immediately respond to The Post's request for comment. Advertisement A merger between BNY, the world's largest custodian bank, and Northern Trust would reshape the asset management sector. Combined, the two banks oversee more than $3 trillion. Shares in Northern Trust jumped 7% as Wall Street analysts argued that a deal could be mutually beneficial, depending on the price. 'There are strategic benefits to BNY from this potential combination and also to Northern Trust,' JP Morgan analyst Vivek Juneja wrote in a research note. 'Key would be the price paid which would determine the financial impact on both companies' shareholders because a high price would hurt both.' Advertisement The deal could strengthen BNY's wealth management business and help Northern reduce its technology expenses, Juneja added. BNY is reportedly considering whether to submit a formal bid to acquire Northern Trust. Bloomberg via Getty Images Shares in Northern Trust have risen about 9% so far this year, pushing the Chicago-based firm to a market value above $21 billion. BNY has a market cap of more than $65 billion. Its shares have rallied more than 50% over the past year, thanks to a turnaround plan led by CEO Robin Vince that has boosted profit and revenue. Advertisement 'Any deal would have to clear antitrust hurdles' though, Rajiv Bhatia, analyst at Morningstar said, adding that State Street, JPMorgan and Citigroup are still major competitors. Analysts at Keefe, Bruyette & Woods said in a note they see a low probability of this merger getting done. It's unclear whether Northern Trust has any interest in selling, and even in that case, the merger would likely face large antitrust roadblocks, the note said. 'We believe the bar is soon to be lowered for larger bank mergers, this potential deal would involve a Category 1 bank and a Category 2 bank, which may still face a higher hurdle than two super-regional banks,' the note from David Konrad said. The Trump administration has painted itself as a more deal-friendly one — already approving Capital One's $35 billion takeover of Discover.
