Freed after passing stress tests, financial firms unleashed a windfall of repurchases that single-handedly reversed a year-to-date decline in overall stock buyback authorizations.
Banks just turned it all around for U.S. stock buybacks.
Freed after passing stress tests, financial firms unleashed a windfall of repurchases that single-handedly reversed a year-to-date decline in overall stock-buyback authorizations. At $390 billion, planned buybacks are 3 percent above the amount at this time last year, a turnaround from the previous week, when the total was down 9 percent.
JPMorgan Chase & Co., Citigroup and Bank of America led financial firms unveiling $92.8 billion of buybacks Wednesday night after approvals from the Federal Reserve, setting a single-day record, according to data compiled by Birinyi Associates that goes back to 1984.
It’s a revival for one of the bull market’s biggest allies. Companies have snapped up trillions of dollars of their own stock in a five-year shopping binge that dwarfed equity demand from every other buyer. It adds a dose of confidence that companies still see value in shares despite warnings from Fed officials that asset prices are expensive.
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Wednesday’s authorization surpassed the previous record of $56 billion set on July 20, 2006, and represented a big jump for banks, which usually make public their distribution plans after passing the annual stress tests. This year’s total was 94 percent higher than 2016.
There are signs that the rebound may last. Unlike 2016, when stagnant earnings and rising bond yields contributed to a 26 percent drop in announced buybacks, profits from the S&P 500 index members are forecast to grow 12 percent this year.
Investor interest in buybacks is also coming back. The S&P 500 Buyback Index, tracking the top 100 companies with the highest payout ratio, is up 1.9 percent this month, poised to beat the market for the first time since November.