Some the largest U.S. banks are planning to pay fatter dividends to their shareholders this year. That's according to "Big banks gearing up to restore dividends," a Jan. 16 news story by Nelson D. Schwartz and Eric Dash in The Boston Globe.
Here are some data points, in part from the story:
- $70 billion. That's how much one analyst, Foresight Analytics, reportedly expects U.S. banks to report in 2010 profits. That much would be a huge increase from the $12.5 billion earned in 2009, though half as much as 2006's total.
- $51 billion. That's how much the financial sector of the Standard & Poor's 500 index paid in dividends to shareholders in 2007. By comparison, last year's total was only $19 billion, a drop of about 62 percent.
- $17.4 billion. That's how much JP Morgan Chase, a large bank by any definition, recently reported in 2010 earnings.
- $1.52. That's how much Chase's annual per-share dividend was back before the financial crisis. Last year, the dividend was only 20 cents per share. Multiple those figures by, say, 1,000 shares, and the difference works out to $1,520 then, $200 now.
Bank dividends may seem of greatest interest to the investors who stand to collect them, but banking customers surely have an stake as well since dividends come from profits, profits come from revenues and revenues, of course, come from customers. So far, the rumors of bigger dividends for bank shareholders and the reports of more costly fees for customers are running neck-and-neck like a pair of racehorses near the finish line. Bank of America, for one, is planning to raise fees on checking accounts, as my colleague Claes Bell recently reported on this blog in "Fee blizzard rolling in."
The higher dividends aren't a done deal since the Federal Reserve must give green lights to the banks before they make those higher payouts to shareholders. The Fed is set to perform new "stress tests" on 19 of the largest U.S. banks, which must pass the tests before they get the Fed's OK to up their dividends.
So, what's your view: Should the Fed say yes or no to banks paying out returns to shareholders?