Over the next few days, Bank of America (BAC 0.50%), JPMorgan Chase (JPM 0.94%), and Wells Fargo (WFC 0.81%) investors will engage in a lot of water-cooler talk about dividends and buybacks. This is the first full week after the comprehensive capital analysis and review, or CCAR, the component of the Federal Reserve's bank stress tests that included the Fef's yays or nays for the capital allocation plans of the nation's big lenders. All in all, financials did very well this year, with 25 of the 30 tested companies getting the green light for their proposals.
Shareholders of Bank of America, JPMorgan Chase, and Wells Fargo will happily chatter about their banks' bumped-up dividends and share repurchase programs. Prior to the CCAR, Wells Fargo distributed a dividend of $0.30 per share on March 1. For its next distribution, this will now rise to $0.35 per share.
Not every bank is as fortunate. Citigroup (C 0.84%). was among the five banks to see its capital plan rejected in the CCAR. The big incumbent's shareholders remain stuck with a $0.01 per share dividend, which it has been paying every quarter for over five years now. Like Bank of America, Citigroup had requested a boost to $0.05 per share (in addition to a $6.4 billion share buyback initiative), but the regulator vigorously shook its head at the scheme.
This week, investors in financial majors will not only be keeping an eye on developments in the domestic market. The European Central Bank will hand down a decision on its benchmark main refinancing rate on Thursday. It is widely expected to keep the current level of 0.25%, as the continent's recovery has been slow and Euro-business needs the juice a low number can provide.
Whatever the decision, it will have some impact on financials with a big presence in Europe. Among the four American biggies, this means Bank of America (in the form of its powerhouse investment banking subsidiary, Merrill Lynch), JPMorgan Chase, and Citigroup. All three stand to benefit from a recovery in the European economy, but we shouldn't expect that for a while no matter what the ECB does.
The American macro economy, meanwhile, will be in focus as several key figures are released over the next few days. Arguably the most critical is the March unemployment rate, to be published Friday morning by the Bureau of Labor Statistics. The consensus is for a slight drop, to 6.6% from February's 6.7%, due in no small part to the thaw in the weather. Other notable macro numbers coming down the pipe this week include the Census Bureau's figure for construction spending in February, to be published on Tuesday, and the February trade deficit figure from the Commerce Department, to be released Thursday.
For the most part, though, this week should be all about the micro economy, particularly as it concerns the operations of the nation's financials. Last week was a good one for banks; they'll hope the same for this Monday to Friday period, too.