State Street Corporation (STT) has received the Federal Reserve’s approval for its capital plans after the clearance of the Stress Test. Upon receiving the approval, the board of directors has announced a buyback plan authorizing purchase of up to $2.1 billion worth of stock through Mar 13, 2014.
The new buyback plan represents roughly 17% hike from the prior year’s program, which authorized the repurchase of $1.8 billion share from Apr 2012 through Feb 2013. State Street may begin to repurchase the shares through various transactions including open-market purchases, off-the-market transactions and under Rule 10b5-1of the trading programs.
The capital plan reinforces the company’s priority to enhance shareholders’ value. Earlier in Feb 2013, State Street had declared an 8.3% hike in its quarterly dividend to 26 cents per share, payable on Apr 21, 2013 to stockholders of record as of Apr 1, 2013.
This new stock buyback plan authorization follows the 2013 Comprehensive Capital Analysis and Review (CCARF) process, under which the Federal Reserve appraised State Street’s 2013 capital plan and did not raise any objections to the proposed capital actions.
State Street, along with many other financial institutions, had submitted its capital plan to the Federal Reserve for Stress Tests to secure approval for dividend increases and share buybacks. Stress Test was conducted to find out whether the banks have enough capital to survive another financial crisis. 17 out of 18 companies passed the test, where Ally Financial Inc. was the one to fall short.
Moreover, the Fed approved capital plans of 14 companies including State Street. However, capital plans of Ally Financial and BB&T Corporation (BBT) were not approved and JPMorgan Chase & Co. (JPM) and The Goldman Sachs Group, Inc. (GS) were asked to re-submit their plans after making certain amendments.
State Street’s continuous efforts at enhancing shareholder value are highly commendable. This reflects the company’s strong fundamentals and robust liquidity.
State Street currently retains a Zacks Rank #2 (Buy).
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