Wednesday, January 12, 2011

Here Come the Bank Dividends (JPM; PNC; USB; WFC) Analyst Dick Bove Swings By

First up, Deal Journal:
Banks have submitted their capital plans to the Federal Reserve, part of a stress test (yes, again) to determine which banks are healthy enough to resume dividends or buy back their own stock.

The stress test results are expected in March, after which we should expect to see a mini-wave of dividend boosts and other shareholder givebacks, maybe even deal making. Many bank executives have practically been begging for permission to pay their shareholders some cold, hard cash.
But not all banks will be in a position to start or raise their dividend payouts.
Goldman Sachs, in a preview of banks’ fourth-quarter earnings results, said it expects U.S. Bancorp, J.P. Morgan Chase, PNC Financial Services and Wells Fargo to launch or hike dividends. Dividends for Bank of America and Citigroup are “uncertain,” the Goldman equity analysts said....MORE

And from CNBC:

For Bank Investors, Wait for Dividends Coming to End
When the biggest US banks submit their capital plans to the Federal Reserve on Friday it will mark an important post-crisis milestone for the industry, clearing the way for many of them to resume providing dividends.

Following the collapse of the financial system in 2008 and 2009, most of the industry's biggest players were forced to take government bailout money and were restricted on their ability to pay dividends.
But as part of guidelines the Federal Reserve issued in November, if the banks can meet capital requirements and have made their required payments under the Troubled Asset Relief Program, they once again can issue dividends.

It's a day investors have been waiting for going on two and a half years.
"There's nothing more a bank would like to do than announce a dividend increase with 2010 earnings numbers," said Fred Cannon, chief equity analyst at Keefe, Bruyette & Woods in New York. "The market is all ears for dividend announcements."

The Fed guidelines establish a number of yardsticks with which banks must comply, including a 5 percent Tier 1 common equity ratio, which measures how much capital banks hold and the losses they can withstand.

Most, if not all, of those 19 biggest banks specifically targeted in the co-called stress-test requirements are likely to meet the levels as outlined. All but those that still owe TARP money are expected to announce paybacks to shareholders at some point during the year, though only those on surest footing are likely to make those announcements in the first quarter.

"The whole financial structure of the banking industry has turned around," said Dick Bove, banking analyst at Rochdale Securities of Stamford, Conn. "The reason why bank dividends are going up is because banking companies are making money, their balance sheets are loaded with excess cash, and their outlook is phenomenally good."...MORE, including Bove on individual names.