- Key insight: Banks' buyback plans signal confidence that regulators will implement capital requirements that are more lax than proposed rules during the Biden administration.
- Supporting data: The top four banks collectively increased share repurchases by more than $10 billion during the third quarter.
- What's at stake: Banks have been shoring up their capital cushions, which can now be spent on strategies like organic growth, acquisitions, lending and buybacks.
Banks have accelerated their stock buybacks in recent weeks, as Trump administration regulators continue to stoke confidence across the industry that once-feared proposed capital requirements will be manageable.
After sailing through the Federal Reserve's annual stress tests this summer, the largest banks in the country ramped up their share repurchases in the third quarter — part of their efforts to return more capital to shareholders and pare back their capital levels.
Many bank executives also rolled out new or expanded plans to buy back more stock, as the prospective regulatory changes aren't expected to be as onerous as the industry had thought they would be during the Biden years.
"Banks are doing a lot of debating right now over the optimal uses of capital if they can't find organic ways to deploy it," said David Smith, an analyst at Truist Securities. "With buybacks, you've got something without execution risk that can be deployed without having to worry about regulatory approvals. So it's just one thing that bank boards and management teams are weighing right now."
Big banks spent the past few years shoring up their capital, as the Fed's so-called Basel III endgame proposal loomed. But the agency's vice chair for supervision, Michelle Bowman, has teased that regulators are now thinking differently about capital mandates than they were before. On Tuesday, Bowman said the revised Basel framework is a priority for the Fed, but she didn't offer a specific timeline.
The Fed has already proposed some changes to the annual stress tests — which model how banks would manage a hypothetical recession — including providing lenders advanced insight into certain scenarios in the exam and seeking public comment on parts of the test that set certain capital minimums.
Changes in expectations about the revised rules have left many banks with excess capital positions, which can prompt questions among investors. Healthy earnings are building those cushions even further.
Spare capital can be used for organic growth, mergers and acquisitions, more lending or share buybacks.
But Phillip Basil, director of economic growth and financial stability at the nonprofit group Better Markets, which has pushed for higher capital requirements, said banks are quick to get rid of capital through buybacks or dividends.
"Anytime there's a bit of capital relief, anytime stress capital buffers go down, the first action by the banks, particularly the largest banks, is to release capital to shareholders," Basil said. "They do not waste any time in returning money to shareholders."
He argued that buying back stock is a sign that banks aren't going to raise more deposits to increase lending.
Smith has a different perspective, saying that banks' loan growth is still slowly recovering from years of rapid shifts in interest rates, election-related uncertainty, economic instability and trade policy moves.
"If we don't see a pickup in loan growth, there's no reason to think that the pace of buybacks is going to slow down anytime soon," he said.
Between the top four banks — JPMorganChase, Bank of America, Citigroup and Wells Fargo — buybacks increased by more than $10 billion in the third quarter from the same period a year ago.
Citigroup accelerated its buybacks sharply between July and September, repurchasing $5 billion of common stock, compared with $1 billion during the third quarter of 2024. Chief Financial Officer Mark Mason said in October that the company would continue buying back stock in the fourth quarter as part of a $20 billion share repurchase plan it authorized earlier this year.
Bank of America bought back more than $5.3 billion of its shares in the third quarter, up more than 50% from the same period in the prior year. In August, the Charlotte, North Carolina-based bank began a $40 billion common stock repurchase program.
Chief Financial Officer Alastair Borthwick said at an industry conference in September that the plan would increase share buybacks over time "while also increasing the pace at which we can support loan creation."
"So we haven't had to choose, we've been able to do both things. The priorities for our bank remain the same," Borthwick said. "Number one, we always want to support our clients and we want to support the future growth of the company. That's always going to be the highest priority for our capital base."
Even JPMorganChase — whose management has long avowed that stock repurchases aren't its priority for capital, especially at the stock's current premium price — bought back more than $8 billion of common stock in the third quarter. That represented a $2 billion increase from the same period last year.
Chief Financial Officer Jeremy Barnum said in October that JPMorganhad to buy back stock to keep its excess capital position "reasonable." He declined to give guidance on the company's future share repurchase plans.
Some other large and regional banks have also ramped up their stock buyback plans. Capital One Financial said last month, following its monumental acquisition of Discover Financial Services, that it would buy back up to $16 billion of stock. Later in October, First Horizon in Memphis, Tennessee, announced that it had authorized a new $1.2 billion common stock repurchase program.
