Citigroup was one of just four firms to flunk its annual financial checkup, sending the shares down as much as 5 percent in late trading.
The vast majority of the banking industry — 15 out of 19 firms — passed the Fed’s exam, paving the way for them to boost their dividends and buy back shares.
JPMorgan’s clearance from regulators allowed the bank and its outspoken CEO, Jamie Dimon, to repurchase some $12 billion in stock and increase its dividend by a nickel, to 30 cents a share.
The moves, announced during regular trading and before the Fed officially released results, sent the broader market soaring.
Citi said that it would have passed its stress test if not for its request to increase its dividend.
“The Federal Reserve advised Citi that it has no objection to our continuing the existing dividend levels on our preferred stock and our common stock, and we plan to do so,” the bank said in a statement.
Bank holding companies underwent a hypothetical stress test that assumed equity markets plunged by 50 percent, home prices declined 21 percent and unemployment rose to 13 percent from the current 8.3 percent.
Bank officials argued with the Fed for weeks over the severity of the test and the treatment of potential loan losses from mortgages and trading operations under those worst-case scenarios.
“We are deeply disappointed with the Federal Reserve’s announcement,” MetLife said in a statement.
Ally also disagreed with the Fed’s conclusions. The mortgage giant said the Fed overstated its mortgage risks and doesn’t account for “management’s track record or commitment to address the legacy contingent mortgage risks.”
Initially scheduled to be released on Thursday, the results were bumped up two days due to media leaks of the results, sources said.
Some industry observers also speculated that JPMorgan Chase forced the Fed’s hand by issuing its own statement just after 3 p.m. yesterday, sending its stock and those of its rivals soaring.
The banks were informed yesterday that they would be receiving the results early, according to sources.
The sources also believed that the banks needed to wait until after the Fed made its results public before individually releasing their own statements. One source described JPMorgan’s early disclosure as a “miscommunication.”
the Federal Reserve, SunTrust Bank, Ally Financial, bank stress tests, stress test, Jamie Dimon, preferred stock, JPMorgan Chase, common stock, MetLife