BofA, Citi ask Fed to clarify bank stress test results

By Saeed Azhar

NEW YORK (Reuters) -Bank of America and Citigroup said on Monday they had begun a dialogue with the Federal Reserve to understand differing results between the central bank’s stress test and the companies’ own under the Dodd-Frank Act.

BofA has yet to announce a potential dividend increase, in contrast with rivals. JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley hiked their third-quarter dividends on Friday after sailing through the health check.

The Fed’s annual test showed major lenders, including BofA, have enough capital to weather a severe economic slump, paving the way for them to issue share buybacks and dividends.

But BofA wants to understand the differences in a category called “other comprehensive income” during a nine-quarter period measured in the test, it said in a statement.

The Federal Reserve declined to comment.

BofA’s own analysis implied a worse result than the Fed’s test last week, Piper Sandler analyst R. Scott Siefers said in a note published on Monday.

The discrepancy means “a little more uncertainty in BAC’s results than we would like, but hopefully no change to the end result” of the bank meeting a key regulatory requirement, he wrote.

Last year, BofA raised its dividend to 22 cents, the highest level since 2008, from 21 cents in 2021.

Despite increasing its dividend, Citigroup made a similar statement to BofA on Monday about starting a dialogue with the regulator to understand differences between the stress test results.

Citigroup disclosed on Friday its stress capital buffer (SCB) requirement rose to 4.3%, from a current 4.0%, contrasting with large peers whose SCB dropped.

The size of the SCB, an additional layer of capital introduced in 2020 that sits on top of banks’ minimum capital requirements, reflects how well a bank performs on the test.

Citigroup CEO Jane Fraser expressed disappointment at facing a higher SCB requirement on Friday.

The S&P 500 banks index rose about 1.5% on Monday, while shares of Wells Fargo, Citigroup and Bank of America all climbed more than 1.5%.

Table showing new dividends of banks announced Friday:

Bank New Previous

JPMorgan Chase $1.05 $1.00

Goldman Sachs $2.75 $2.50

Citigroup $0.53 $0.51

Morgan Stanley $0.85 $0.775

Wells Fargo $0.35 $0.30

(Reporting by Saeed Azhar; Editing by Lananh Nguyen, Jan Harvey and Richard Chang)