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US bank capital: US banks get mixed dividend decisions

BAML told ‘no’; Citi surprises analysts; Capital requirements might yet increase

In March, US banks received the decision of the Federal Reserve on whether or not they would be able to start increasing dividends. In January the Fed had begun a second round of stress tests at the largest 19 financial institutions to look not only at capital levels but also at internal capital-planning procedures. More than 100 Fed staff reportedly worked on the decision on whether to allow the banks to pay or increase dividends should they want to or buy back stock.

Of the 19 banks, 12 will be increasing dividends. Of those that are not, two – SunTrust and Regions Financial – were unable to contemplate dividend payments since they had not paid back Tarp money. Ally Financial said its plans were still under review. Metlife said it was premature to discuss dividends as it tends to pay them later in the year. Capital One declined to comment (the Fed has said that its discussions with the financial institutions are private and that it is up to the individual banks to provide public comment). Morgan Stanley has said it is looking to buy the rest of Smith Barney before considering paying dividends.

BAML’s bad news

Bank of America Merrill Lynch, however, which had planned for an increase in dividends later in the year, faced disappointing news.

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