SOURCE: The Bedford Report

The Bedford Report

November 16, 2010 08:45 ET

Major Banks Surging as Investors Anticipate Dividend Hikes

The Bedford Report Provides Analyst Research on Citigroup & JPMorgan

NEW YORK, NY--(Marketwire - November 16, 2010) - Dividend paying companies are attracting a lot of attention right now. Following the recent $600 billion "QE2" announcement, consensus is that interest rates will remain at exceptionally low levels for the foreseeable future. When interest rates are low, investors tend to put their money into dividend paying stocks. Investors usually count on dividend paying stocks during hectic times in the market believing in the company's security and real earnings power. Before the financial crisis, major banks were reliable source of dividends, but by mid-2009 most banks had substantially reduced, or altogether cut, their dividend payments. Recent reports from The Wall Street Journal, as well as interesting remarks from the Fed have raised hope that stronger banks will soon be able to hike their dividends, and has led to increased spotlight on the Financial Sector. The Bedford Report examines the outlook for companies in the Major Banking Industry and provides research reports on Citigroup, Inc. (NYSE: C) and JPMorgan Chase & Co. (NYSE: JPM). Access to the full company reports can be found at:

While the Fed is preparing guidelines on how banks will be able to change their dividend policies in the first quarter of next year, it is clear that only a select few financially strong banks will meet the guidelines. According to Fed governor Daniel Tarullo, "Although the details of these guidelines are still being finalized, I can say that our approach to considering such requests will be a conservative one."

Banks will also have to adhere to a new set of capital standards known as Basel III, if they hope to increase dividends. According to the Basel Committee on Banking Supervision, Basel III will set a tougher standard for the quality of capital as well as the assessment of risks on a bank's balance sheet. According to the proposals under Basel III, only if a bank operating in a steady economic environment maintains a Tier 1 capital ratio of 12% would it be allowed to pay or increase common dividends.

The Bedford Report releases regular market updates on the Major Banking Industry so investors can stay ahead of the crowd and make the best investment decisions to maximize their returns. Take a few minutes to register with us for free at and get exclusive access to our numerous analyst reports and industry newsletters.

Citigroup hasn't paid a dividend since February 2009, and while the company presently has a Tier-1 Common ratio of 10.33% and a Tier-1 Capital ratio of 12.50%, its CEO, Vikram Pandit, believes that "2012 is the year where we think we (Citigroup) would be in position to return capital."

JPMorgan cut its quarterly dividend to a nickel from 38 cents back in February 2009. Presently, JP Morgan's capital and reserve ratios are substantially above average relative to its peers and the company's CEO Jamie Dimon has said the bank is "hopeful" that it can start raising its dividend early next year.

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