Morgan Stanley boosts buybacks to $12bn and doubles dividend

Morgan Stanley said it would double its dividend and boost the size of its share buyback programme to up to $12bn, as a string of US banks outlined plans to return more capital to shareholders after the Federal Reserve last week loosened payout restrictions.

The bank was one of several large American lenders to outline more generous payouts for investors on Monday following publication last week of the Fed’s “stress tests”. The results prompted the US central bank on Thursday to further ease restrictions on dividends and buybacks that were imposed on banks during the Covid-19 pandemic

Morgan Stanley is raising its quarterly common stock dividend to 70 cents a share from 35 cents and will buy back up to $2bn more of its own stock over the next 12 months, having previously committed to a repurchase programme of up to $10bn.

Chief executive James Gorman said the bank had “accumulated significant excess capital over the past several years and now has one of the largest capital buffers in the industry”.

Other large banks also announced higher shareholder payouts but were more reserved than Morgan Stanley. Goldman Sachs raised its dividend to $2 from $1.25, JPMorgan Chase increased its dividend to $1 from 90 cents, and Bank of America boosted its dividend to 21 cents from 18 cents.

However, Morgan Stanley was the only large bank to announce an increase in the size of its buyback programme. Buying back their own stock is more expensive for the banks than it would have been when the Fed imposed the pandemic restrictions, because their shares are now more expensive.

Banking stocks have rallied since September, many to all-time highs on the back of a boom in trading and dealmaking activity, as well as a brightening outlook for the US economy.

Shares in Morgan Stanley gained 2.5 per cent in after-hours trading in New York and Goldman was up 0.6 per cent, while other large bank stocks were flat.

Jamie Dimon, JPMorgan chief executive, said: “Our longstanding capital hierarchy remains the same — invest in and grow our market-leading businesses . . . pay a sustainable dividend, and return any remaining excess capital to shareholders.”

David Solomon, chief executive of Goldman, said: “We are encouraged by the progress in reducing the capital intensity of our business as reflected in the recent stress test results.”

The Fed’s analysis released last week concluded that the 23 banks included in the exercise could suffer almost $500bn in combined losses and still comfortably meet capital requirements.

Additional reporting by Colby Smith in New York