After the closing bell on Wednesday, the Federal Reserve announced the results for the big bank stress tests. Here’s what the results mean for mutual fund investors.
Inside the Results
The Fed reported that all of the U.S. banks passed the stress tests, although not every bank will be able to increases dividends. Here is an overview of the results.
Bank of America (BAC) – The bank’s capital plan was approved by the Fed, but the bank will not be able to boost its 5 cent dividend. The bank was told that it would have to resubmit its plans in the fall. BAC has been authorized to buy back up to $4 billion in shares.
Citigroup (C ) – The bank’s plan has been approved. It will finally be able to raise its 1 cent quarterly dividend to 5 cents per share. The bank was also given permission to buy back $7.8 billion in shares.
Goldman Sachs (GS) – Goldman had to make changes to its original plan, but the Fed approved its dividend hike from 60 cents to 65 cents quarterly.
JP Morgan (JPM) – The firm’s adjusted capital plan was approved by the Fed, and the bank was given permission to increase its dividend from 40 cents to 44 cents. The Fed will also allow JPM to buy back $6.4 billion in shares.
Wells Fargo (WFC) – The bank’s capital plan was approved by the Fed. WFC will be boosting its quarterly distribution by 7% and will also be buying back shares.
Morgan Stanley (MS) – Morgan Stanley’s capital plan was approved by the Fed. The bank has been given permission to buy back $3.1 billion in shares, and to raise its dividend from 10 cents to 15 cents.
More Buy Backs and Higher Dividends... For Most Big Banks
Overall, the results from the stress tests were positive, excluding Bank of America’s probationary results. Every big bank except for BAC will be increasing dividends. Investors should also see a boost in buy backs among the banks.
For investors bullish on banks, a mutual fund may be a good choice to gain exposure to the industry.
Mutual Funds to Watch
Investors interested in gaining exposure to the banking industry may be interested in the funds listed below.
|Symbol||Mutual Fund||Top Five Holdings|
|FSRBX||Fidelity® Select Banking Portfolio||WFC, USB, BAC, JPM, C|
|FIDSX||Fidelity® Select Financial Services||BRK-B, JPM, C, BAC, USB|
|PRISX||T. Rowe Price Financial Services||C, JPM, BAC, STT, MS|
The Bottom Line
Investors interested in the banking industry may consider one of the funds listed above. These funds allow investors to gain exposure to the industry, while remaining diversified.
If you’ve enjoyed this article, sign up for the free MutualFunds.com newsletter; we’ll send you similar content weekly.