Big Banks Have To Limit Their Dividends - Fed

Matt_ORATS

Matt_ORATS

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Big banks will be required to limit dividend payments at their current level for Q3 and going forward based on a formula using their earnings.
The options market took down estimates of dividends that are implied in options prices: Citicorp's down 14%, Wells Fargo's down 8% JPM down 4% and BofA's implied dividend down 5% today from yesterday's levels.

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Data from ORATS API implied dividend calculation.
 
xandman said:
Dividend freeze is understandable. Dividend cuts, no bueno.
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You mean a little socialism is good. That's how Venezuela started its long slide. Today the people are starving and the people are taking animal medicine because medicine for humans is scarce.
 
It no longer amazes me how little members of a trading community understand the basics of capitalism and the role that free markets play in creating progress and yes, societal happiness.
 
In some way this could be an excuse for the banks to cut their dividend without their stock price getting as punished as may have happened if they cut the dividend on their own.

Kohl's might be a case in point: Their stock went up on the same day as the dividend cut announcement.

Here's why: Yesterday Kohl's announced that is secured a $1.5 billion revolving line of credit with Wells Fargo and immediately drew down the entire amount. When it did that, it was forced to suspend the dividend because of covenants in the revolver.

Kohl's also announced a plan to reopen stores and said that some stores were already opened. KSS was up 7.5% after the announcement.

https://blog.orats.com/risky-divide...-after-raising-it-in-march-others-will-follow
 
Matt_ORATS said:
Kohl's might be a case in point: Their stock went up on the same day as the dividend cut announcement.
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The action of Kohl is not out of the ordinary. The bad news is already built into the price of stock. Markets are generally forward looking.
 
yes, it's like the FED is going to let these 4 biggest banks in the US imploded. Then it wouldn't reflect well on the FED (it'd appear a failure on their part, letting the system fail). The FED is going to bail these banks out regardless. Besides, total annual dividend for these 4 banks is peanut to their balance sheets.
if the FED is concerned about system failure, then break up these banks into smaller regional banks like about $50 billion per bank in total asset.

$6,336,000,000 BAC
$8,364,000,000 WFC
$11,160,000,000 JPM
$4,284,000,000 C
--------------------
$30,144,000,000
 
It is all about control. The Fed and politicians believes it is easier to control the behavior of a few large banks than thousands of small banks. It is the one size fits all mentally of bureaucrats. In their mind they disregard the importance of competition among thousands of smaller banks and the resultant benefits to local communities.
 
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