It appears the business of sacking low-income customers with proportionally hefty fees is a profitable one for Wells Fargo, as the bank announced yesterday it was raising its quarterly dividend for shareholders.
In a statement, Wells Fargo confirmed that they are joining JP Morgan Chase in upping dividends after passing the Federal Reserve’s most recent “stress test.” Fifteen out of 19 of the largest banks were able to prove that they could maintain adequate levels of capital throughout a period of economic strife, maintaining plans the reserve bank deems adequate to continue paying dividends and to buy back stock.
One financial expert commented to Bloomberg about the announcement, saying that the news indicates that overall, banks are currently in a stable place:
“The fact that 15 passed a robust test shows the relative financial health of the system,” said Michael Holland, chairman and founder of New York-based Holland & Co., which oversees more than $4 billion including JPMorgan shares. “There has been so much cash built up it almost screams to have some of it shared with investors.”
According to the Fed, the test involved a scenario with 13% unemployment, a stock market decline of 50% and a 20% drop in home prices for the stress test. The conditions surmised would precipitate aggregate losses of more than $530 billion in a nine-quarter long period.
Bloomberg also spoke to analyst William Fitzpatrick of Manulife Asset Management in Milwaukee, who said:
“The taxpayer in particular should take comfort in just how well capitalized the banking system is right now… We’ve come a long way and we put together a stress test that’s very, very challenging and yet the banks came out of there very well.”
Do you worry about the capabilities of major banks like Wells Fargo to hold up if another recession hits?