Financial institution shares rise by the hour when the Fed units the date to carry buyback and dividend restrictions

Federal Reserve Jerome Powell testifies during a hearing of the Senate Banking Committee on the Quarterly CARES Act Report to Congress on Capitol Hill in Washington, USA, December 1, 2020.

Susan Walsh | Reuters

Bank stocks rose in expanded trading Thursday after the Federal Reserve announced its plan to lift restrictions on dividends and buybacks from financial companies.

JPMorgan Chase’s shares were up 1%, while Citigroup and Wells Fargo were up 0.7% each. Goldman Sachs was up 0.5%.

The Fed said it would keep its restrictions on banks in the pandemic through June 30. The Fed had previously announced that banks could resume their buybacks and dividend increases in the first quarter. So Thursday’s announcement is a delay, but it provides more clarity for investors.

The major US banks announced in March last year that they would stop buying back shares during the Covid-19 crisis, which had just led to a dramatic sell-off in the stock markets and raised concerns about financial stability. The Fed set official limits on dividends tied to a bank’s earnings last June, forcing Wells Fargo to cut its payouts.

Bank stocks have performed well in recent months as investors become more optimistic about the prospect of an economic recovery. The SPDR S&P Bank ETF has risen by more than 20% since the beginning of the year.

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