Stock Nostradamus

5 Big Bank Stock Buybacks
By Maria Woehr

NEW YORK (TheStreet) — Increases in bank dividend payouts have been on the rise since the Federal Reserve’s announcement of the Comprehensive Capital Analysis and Review, or “stress tests.” Dividend increase announcements got most of the buzz with the release of the results.

However, bank announcements of buybacks as a way of returning capital to shareholders were just as prolific.

Buybacks are expected to make up two-thirds of payouts in 2011 and their significance should not be overshadowed by dividend payouts, according to analysis done by Goldman Sachs(GS).

“For JPMorgan Chase(JPM), Wells Fargo(WFC), and State Street(STT) over two thirds of the announced capital returns are expected to come in the form of a buyback,” said analysts Richard Ramsden and Christopher Neczypor in a note. “We believe an additional element of the bank capital plans was the intention to repurchase trust preferred securities.”

The aggressive buybacks have even led Standard & Poor’s taking a close look at banks’ share buyback programs as possibly weakening balance sheets.

Part of the reason banks are boosting their repurchasing programs is because in 2013 banks with assets greater than $15 billion can no longer include trust preferred as part of their Tier One capital as required by Dodd Frank. The largest 14 banks have almost $100 billion of trust preferred outstanding, so the scramble to pick those shares up is on, according to analysts at Goldman.

Here are is a list of the biggest banks that will be repurchasing shares in 2011.

The definition of buyback from answers.com is “The repurchase of stock by the company that issued it, as to reduce holdings of a single investor or increase the value of shares by reducing their number.”

In the case of most of these banks they will be repurchasing the stock from the government who (if these banks were involved in the $700 million bank bailout) purchased large sums of the banks stock.

The article then goes into each bank specifically stating the reasons why they believe these stocks are the right choice. For the most part I agree with Woehr, I’ve been a big fan of Wells Fargo for some time now. I personally seen their take over of Wachovia’s down south in Atlanta and realized this stock is going to the top. It is the stock that I’m currently invested in and one that my father has invested in as well.

Next when anyone talks about investment banking, JP Morgan Chase is always mentioned near the top of the list. JP Morgan is one of the most prestigious names in the business. Goldman Sachs Group shares the same prestigious pull with clients but currently is selling at $160.23 which is out of my price range to really buy a significant quantity to turn a substantial profit.

Two banks that I was surprised not to be picked by Woehr was First Republic Bank (FRC) and Citigroup. Both these banks have growing high bankroll clients (by that I mean millionaires and billionaires). But I’m guessing Woehr is classifying these banks as well as Bank of America (BAC) as none major banks.

Tags: Bank of America, Citigroup, First Republic Bank, Goldman Sachs, JP Morgan & Chase, Standard & Poor, Wells Fargo