Top U.S. banks raise dividends after sailing through Fed stress tests

By Saeed Azhar, Tatiana Bautzer and Nupur Anand

NEW YORK (Reuters) -U.S. banks including JPMorgan Chase, Wells Fargo, Goldman Sachs and Morgan Stanley hiked their third-quarter dividends on Friday after sailing through the Federal Reserve’s annual health check, which showed they have enough capital to weather a severe economic downturn.

JPMorgan, the biggest U.S. bank by assets, intends to increase its quarterly stock dividend to $1.05 per share from a current $1.00. Wells Fargo will boost its dividend to 35 cents a share from 30 cents, the companies said.

Goldman Sachs’ dividend will rise to $2.75 a share from $2.50, while Morgan Stanley’s will increase to 85 cents share from the current 77.5 cents.

Citigroup said its dividend will rise to 53 cents a share from 51 cents.

The banks announced the dividend hikes after passing the Fed’s stress test, which determines how much capital they need to set aside before they can return money to shareholders.

Citigroup CEO Jane Fraser said the bank repurchased $1 billon of common stock during the second quarter and will continue to evaluate its capital actions every quarter.

Under the Fed’s scenario of a major economic slump, the 23 banks tested – including JPMorgan, Bank of America and Goldman Sachs – would suffer a combined $541 billion in losses, while still holding more than twice the amount of capital required.

The largest U.S. lenders stayed resilient despite the failures of three large regional banks that roiled the industry earlier this year. Big banks stayed on a firm footing even as the Fed raised interest rates to tame inflation, which could tip the economy into recession.

Analysts had expected banks to stay conservative given the uncertain economic environment while they prepare for international capital rules that could be announced as early as this summer.

(Reporting by Saeed Azhar, Nupur Anand and Tatiana Bautzer; Editing by Michelle Price, Lananh Nguyen, Richard Chang and Diane Craft)