PNC, BNY Mellon, Fifth Third banks pass Federal Reserve stress tests
The Federal Reserve gave approvals on Thursday for three of the biggest banks in Western Pennsylvania to raise stock dividends and repurchase shares on finding that they would be able to withstand a deep recession, even with those capital distributions.
The approval of dividend payouts and share repurchase plans for PNC Financial Services Group, Bank of New York Mellon Corp. and Fifth Third Bancorp were part of the second phase of annual stress tests of the 18 biggest banks conducted by the Fed since the 2008-09 financial crisis.
As a result, Bank of New York Mellon Corp. said it will repurchase up to $1.35 billion of common stock between next quarter and first-quarter 2014.
BNY Mellon also said its directors will consider raising the quarterly common stock dividend 15 percent, or about 2 cents a share, when they meet next month. The dividend is currently 13 cents a share.
PNC Financial Services Group said its board would consider raising its quarterly common stock dividend from the current 40-cent rate when directors meet April 4.
PNC said it does not plan to repurchase shares because it wants to preserve capital to invest in RBC Bank, the 400-branch, Southeast bank franchise PNC acquired in 2012.
Fifth Third Bancorp, which has 15 branches in the Pittsburgh region, also had the Fed approve its capital plan. In response, the bank's board will consider a dividend increase in June and might repurchase up to $984 million of common stock.
The Fed responses to the banks' capital plans and details of their intentions were released after the close of markets on Thursday.
“The view at the Fed was that the (biggest) banks had paid out too much capital before the financial crisis,” said Nancy Bush, bank analyst for SNL Financial in Charlottesville, Va. That put the banks in jeopardy, which resulted in the federal bailout.
“This is going to be a much more parsimonious group regarding dividends for a great while,” said Bush of the 18.
Under the latest stress scenario, the Fed assumed the unemployment rate would rise to 12.1 percent, stock prices would drop 50 percent and housing prices would fall more than 20 percent. If that occurred, the Fed projected losses at the 18 banks would total $462 billion over the next two years.
The Fed rejected the capital plans of BB&T Corp. and Ally Financial for not having enough capital. The central bank gave conditional approval for Goldman Sachs and JPMorgan Chase to return capital to their shareholders.
Before the onset of the financial crisis, PNC paid a 66-cent dividend. The bank slashed it to 10 cents in April 2009 to conserve capital. The bank then raised the payout rate to 35 cents in April 2011, then to 40 cents last April.
BNY Mellon had slashed its quarterly payout to 9 cents from 24 cents in April 2009, also to conserve capital. The bank then raised the dividend to the current rate of 13 cents in May 2011.
Fifth Third paid 44 cents a share in April 2008, then cut the rate to 1 cent a share in January. The bank gradually raised the rate over the next three years up to 10 cents a share last October.
Thomas Olson is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Hospitals, doctors in Pa. received $32M in 5 months from drug, medical device companies
- EPA says greenhouse gas releases from wells, pipelines decline
- Google Pittsburgh instrumental in fight against hackers, co-directors say
- LNG exports get federal approval from Dominion’s Cove Point terminal
- Retirement planning is about more than just money
- Education spending helps to widen wealth gap
- Cranberry-based Prodigo Solutions: Hospitals can reduce high supply costs
- Study: Wellness programs don't save money, but employee health improves
- Western Pa. unemployment rate holds steady in August
- Trib 30 index of Pittsburgh-area stocks falls in September
- Shareholders cheer eBay’s decision to spin off PayPal