Wells Fargo hikes dividend more than other banks but banks hit pause button on stock buyback plans

By Steve Gelsi

J.P. Morgan analysts on Monday said Wells Fargo & Co.'s 17% dividend hike outpaced other banks in a flurry of dividend updates from the U.S.'s largest banks, but it was still less than expected.

Broadly, bank stocks maintained their upward momentum in the first day of trading in the second half of 2023, after the U.S. Federal Reserve wrapped up its annual stress tests last week and big lenders revealed annual dividend plans late Friday.

In a separate broker comment, Wells Fargo (WFC) moved up by 1.7% as Raymond James analyst David Long raised his target price for the stock to $51 a share from $48 a share and reiterated a strong buy rating on the megabank.

"We remain bullish on WFC shares, as we see several positive catalysts on the horizon, including a lower-than-peer deposit beta, further expense rationalization, and the eventual removal of consent orders (improved governance)," Long said.

The Financial Select Sector SPDR Fund (XLF) was up by 0.6%, the KBW Nasdaq Bank Index rose 1.8%, the SPDR S&P Regional Banking ETF (KRE) is up 2.3% and SPDR S&P Bank ETF (KBE) is up by 1.9%.

Bank of New York Mellon (BK) is up 1.2% after it hiked its dividend by 13.5% and State Street (STT) rose 1.6% after it increased its dividend by 9.5%.

Citi (C) rose 1.5% and JP Morgan Chase (JPM) moved up by 0.8% after they increased their dividends by 4% to 5% each. It was the first dividend increase at Citi in four years.

Northern Trust (NTRS) rose 1.7% and Truist Financial (TFC) rose 3.4%. Neither of the two banks raised raise dividends.

Citizens Financial (CFG) was up 1.7% and US Bancorp (USB) was up by 1.6%. The two banks did not comment on any potential dividend increases.

Goldman Sachs (GS) was higher by 1.3% and Morgan Stanley (MS) was up by 1.2%. The two investment banks increased dividends by 9% to 10%.

For now, lenders are holding off on any new stock repurchase plans as they await further direction from regulators on capital requirements, J.P. Morgan analysts noted.

Meanwhile, Raymond James analyst Long reiterated an underperform rating on US Bancorp and said the bank's outlook for net interest income and net interest margin is "overly optimistic" given higher deposit costs in the industry and mixes shifting away from noninterest-bearing sources. US Bancorp stock was up 1.9% in Monday morning trading.

Looking back at the first half of 2023, JPMorgan Chase led the six U.S. megabanks with an 8.46% gain as of June 30, according to Dow Jones Market Data.

Wells Fargo is in the No. 2 slot with a gain of 3.37%, followed by a 1.79% rise by Citigroup and a 0.45% gain by Morgan Stanley. Bank of America lagged the group with a loss of 13.38% as of June 30, while Goldman Sachs fell 6.07% during the same time period.

By comparison, the S&P 500 rose 15.91% in the first half of 2023, while the SPDR S&P Bank ETF (KBE) is down by 20.27%.

-Steve Gelsi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

07-03-23 1309ET

Copyright (c) 2023 Dow Jones & Company, Inc.