I was disappointed with the increase but it appears that the Fed told banks to move very cautiously. Bbt 2nd qtr 2011 annualized yield is 2.5% vs. 1.9% for usb, 1.5% for wfc, 1.5% for stt, and 2.2% for jpm. Looks like the payout ratio for these other banks is in the 15% to 20% range well below the 30% bogey.
It is true that these other banks also implemented share buybacks to supplement the quarterly dividend. Given the today's envirnoment I'm not in favor of share back. Imo, it's not justified to buyback shares at say a 50% premium vs. price of share reissuance 2 years ago. Also, substantially reduces tangible book value which seems to get much attention these days. There are many opportunities going forward to grow loans especially since the securitization market has been permanently altered. Also, the m&a opportunties will be huge.
We now know the May dividend for certain so at a 30% payout ratio, it equates to $.57 eps. At 20% it equates to $.85 eps. I think it safe to assume that the consensus estimate of $.30 will be increased substantially. The recent $.28 estimate made by the neanderthal man from credit suisse, craig segenthaler (which tanked share price), is ridiculous.
We will get first quarter results soon. You got a bet on this. There is a large range of prediction. Mine is closer to 40¢/share.
Concerning share buybacks, the stock price 2 years ahead is more relevant than the stock price 2 year ago IMHO. Also, for a bank that cant make any further acquisition because of it's actual size, this can be a very valid use of excess cash.