Morgan Stanley boosted its dividends by 33% to $0.20 after it received conditional approval from the Fed’s 2016 stress tests in June. It will also buy back stock worth $3.5 billion over the next 12 months. The dividend will be effective beginning in the third quarter. It represents an $0.80 dividend on an annualized basis and a yield of 2.8%—a 33% increase from Morgan Stanley’s previous quarterly dividend of $0.15. Peers (XLF) (VFH) Bank of America (BAC) and Citigroup (C) also hiked their dividend payouts, while JPMorgan Chase (JPM) and Wells Fargo (WFC) kept them constant. During the second quarter, Morgan Stanley repurchased $625 million in common stock or 23 million shares.
Morgan Stanley’s capital plans received conditional approval, but the bank will need to resubmit plans by the end of the year. The central bank said that while it didn’t object to the bank’s capital plan, it showed “material weakness” in its planning process and that the plan didn’t “adequately reflect risks and vulnerabilities.” The Fed noted weakness in governance and controls around scenario design and modeling practices. “We are committed to addressing the Fed’s concerns about our capital planning process and fully expect to meet their requirements within the established timeframe,” Morgan Stanley chair and CEO James Gorman said in a statement after the stress test results were declared.