State Street Corporation
) 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.
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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 (CCAR) process, under
which the Federal Reserve appraised State Street's 2013 capital
plan and did not raise any objections to the proposed capital
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
) were not approved and
JPMorgan Chase & Co.
The Goldman Sachs Group, Inc.
) were asked to re-submit their plans after making certain
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).