Bank dividends could be back, according to analysts

A shopper pays cash for sales merchandise December 26, 2000 at the Lakeline Mall in Austin, Texas. Stores were hoping that after Christmas shopping could salvage what seems to be a disappointing holiday season.

TEXT OF INTERVIEW

STEVE CHIOTAKIS: The financial system's been through the ringer. And for at least a couple of years, big banks stopped paying out dividends to their investors. But with big profits returning to the banking sector -- just today JPMorgan Chase reported earnings were up 50 percent last year -- analysts say those dividends could be back. This week, the Federal Reserve, which has final say in the matter, began stress-testing the biggest banks to determine if they're healthy enough.

Eric Dash is banking reporter for the New York Times. Thanks for being with us.

ERIC DASH: Hey it's great to be here.

CHIOTAKIS: So banks are getting ready to pay out these dividends. Who's going to win here?

DASH: You're going to see ordinary investors -- retirees who depend on dividend payments as a steady source of income -- winning because the banks are going to increase those from just pennies a quarter. I think that hedge funds, asset managers and mutual funds that own a lot of bank stock will also win. And for better or worse, the bank executives themselves because they own so many of their company's shares, they'll win too. So, everybody is going to win.

CHIOTAKIS: And so -- a little more infusion of money into the economy. What does it mean for the overall economy then?

DASH: I think it's really a sign that things are improving. I mean, think about it -- it's pretty remarkable. Just a year or two ago we were in the thick of the financial crisis. Now they're profits have come roaring back, but profits for the banks are doing well because interest rates are low and they have very fat profit margins. And the banks are inundated with all this excess cash. And they don't know what to do with it. So, if they don't know what to do with it, they say why can't we pay our shareholders. And that's what they're asking the Federal Reserve to do.

CHIOTAKIS: Eric Dash, reporter for the New York Times. Eric thanks.

DASH: Thank you.

About the author

Steve Chiotakis was the host of Marketplace Morning Report until January 2012.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...