JPMorgan Chase & Co. became the first U.S. bank on Tuesday to say regulators have completed stress tests of its balance sheet and approved a dividend increase and stock buybacks.
The bank said it will raise its quarterly dividend by a nickel to 30 cents (U.S.) and buy back as much as $12-billion of stock this year.
The move came just ahead of a Federal Reserve Board announcement on the results of stress tests for 19 U.S. bank holding companies.
JPMorgan shares surged on the news and closed up more than 7 per cent at $43.39.
The bank said in a statement that the Federal Reserve has informed the company that it did not object to its plans to distribute capital.
"We are pleased to be in a position to increase our dividend and to establish a new equity repurchase program," chief executive officer Jamie Dimon said in the announcement. "We expect to generate significant capital and deploy that capital to the benefit of our shareholders."
Mr. Dimon has said in the past that many banks will have more capital than they need as customers pay back loans and losses from the financial crisis subside. While his view would seem to contradict requirements that banks meet higher capital thresholds by 2019, the approval of JPMorgan's distributions indicates regulators decided the bank has enough capital to make the payouts and meet the new thresholds.
The bank said it may not buy back all of the stock approved, depending on market conditions.
Other banks also announced hikes in shareholder payouts.
U.S. Bancorp said it will boost its annual dividend by 56 per cent to 78 cents per share and buy back up to 100 million shares of its stock, after it passed the Federal Reserve stress test.
U.S. Bancorp said its quarterly dividend will increase to 19.5 cents per share. It will be paid April 16 to shareholders of record March 30.
The bank's buyback of 100 million shares will replace its current buyback program and will run through March, 2013.
BB&T Corp. also is raising its dividend, by 25 per cent, to 20 cents a share from 16 cents. The company's next dividend is payable May 1 to shareholders of record on April 9.
Wells Fargo & Co. will nearly double the size of its first-quarter dividend. The bank will add a dividend of 10 cents per share to its previously announced quarterly dividend of 12 cents per share. The new dividend will be paid March 30 to shareholders of record on March 26.
American Express Co. plans to buy back up to $5-billion of its own stock and boost its quarterly dividend to 20 cents per share from 18 cents.
With files from The Associated Press