Dividend Cuts: Who's Next?

US Banks are finally cutting dividends to acceptable levels to conserve capital.

US Bancorp (USB) cut its dividend 88% from $1.70 to .20 per share.

PNC Financial (PNC) has reduced its dividend from $2.64 a share to .40 a share.

Wells Fargo (WFC) is the last big bank standing that has not reduced its dividend yet. I don’t know how long this can last with the stock barely above single digits.

Now that major banks are cutting dividends look for insurers and credit card companies to start cutting next. Dividend cuts at Capital One (COF) and American Express (AXP) appear likely.

Comments

[oceansmike:]

Mark, 1. Its being pounded lower by Shorts and Naked shorts , and 2. Why are so many short traders so interested in WFC well being,, as a Long I need the Dividend, 3. the shorts have ruined every other Company stock I own,, so the moral of the story are you a Wolf in Sheeps Clothing a News Journalist fronting for one of the Hedge Funds (who every one and his grandmothers Knows is a front for Naked Shorts,,ok said my peace,,Please don't do any more help to WFC ,,Cramer does enough for the financials,,one day you'll have to go back to using a Piggy Bank (or Mattress) ,,Thanks for your Understanding,,.,,Ocea...

Mar 05 06:31 AM

[philipmax:]

Let's all understand, these institutions will shortly need large capital infusion from the sale of stock to the public. By cutting their dividends now these guys are going to have long term low valuations as the strength of their future dividends will always be suspected.

And while we're on the subject of valuation, were all these banking outfits drinking the same cool-aid? How do you not know the extent of your risk when that is your only job? Banks have to understand the prospective borrowers' financial position before they issue any loans

I would like the dividend cuts to be followed by a 20% pay cut for all a management., an immediate cessation of ALL stock options to any employee until the banks are fiscally sound.

Mar 05 06:40 AM

[greedcanbgood:]

Philipmax - you had me until the last paragraph. Part of the problem is people in general, the legislators and the media not taking the time to 1 - Learn the difference between an investment bank and a commerical bank and 2 - not taking the time to learn about finance in a commercial bank. Banks like USB, PNC and BB&T (perhaps even WFC) should NOT be lumped in with the likes of Citi, Bear, Morgan Stanley and others.

USB, PNC and BB&T have been especially prudent in their lendind and credit portfolios and while certainly they are experiencing an increase in losses they are occurring at a fraction of most other financial institutions. They say that a rising tide raises all ships and it appears that the converse is true. That said, not ALL the ships should be scuttled.

Mar 05 10:29 AM

[notsosmart:]

the tide is out.all the ships are lowering.near the bottom? depends on the draft.

Mar 05 11:06 AM

[philipmax:]

I do agree with you, greedcanbegood, that there is a big difference between investment banking as conducted by Citi and JPMorganChase and plain vanilla banking such as USB and PNC. But the market isn't taking the time to differentiate .
I have great faith in the "good banks" but they stood in line to get the TARP and I don't see them refuting the excesses that are attributed to the others.

There is no doubt in my mind that the repeal of the Glass-Steagle act in 1997 was the ignition point for this debacle. It took ten more years of unabated greed supported by the total lack of supervision and enforcement to get us here.
So, any bank that takes TARP money and reduces its dividend and still reporting large reserves for bad debt, is probably hiding some shenanigans in its balance sheet. And... Yes, the management should bear responsibility, either by resigning or by reducing its bloated pay scales. As to stock options, for what? Pray tell, for what? Why should we the stockholders have to suffer dilution of our equity (be it ever so small) at the expense of mismanagement.? I stand pat with my demands and would like to add that there ought to be some indictments coming soon or there may well be an unwelcome surge in "other" crimes in this country as the population reacts to injustice.


On Mar 05 10:29 AM greedcanbgood wrote:

> Philipmax - you had me until the last paragraph. Part of the problem
> is people in general, the legislators and the media not taking the
> time to 1 - Learn the difference between an investment bank and a
> commerical bank and 2 - not taking the time to learn about finance
> in a commercial bank. Banks like USB, PNC and BB&T (perhaps
> even WFC) should NOT be lumped in with the likes of Citi, Bear, Morgan
> Stanley and others.
>
> USB, PNC and BB&T have been especially prudent in their lendind
> and credit portfolios and while certainly they are experiencing an
> increase in losses they are occurring at a fraction of most other
> financial institutions. They say that a rising tide raises all ships
> and it appears that the converse is true. That said, not ALL the
> ships should be scuttled.

Mar 05 06:25 PM

[biomedlives:]

"Banks have to understand the prospective borrowers' financial position before they issue any loans." Amen. The banks should have been smart enough to identify "predatory borrowers" who would be unlikely to repay their loans.


On Mar 05 06:40 AM philipmax wrote:

>
>
> Let's all understand, these institutions will shortly need large
> capital infusion from the sale of stock to the public. By cutting
> their dividends now these guys are going to have long term low valuations
> as the strength of their future dividends will always be suspected.
>
>
> And while we're on the subject of valuation, were all these banking
> outfits drinking the same cool-aid? How do you not know the extent
> of your risk when that is your only job? Banks have to understand
> the prospective borrowers' financial position before they issue any
> loans
>
> I would like the dividend cuts to be followed by a 20% pay cut for
> all a management., an immediate cessation of ALL stock options to
> any employee until the banks are fiscally sound.

Mar 05 08:58 PM

[attack:]

The Glass-Steagal ACT should have never been abolished. This is the fault of Clinton and Bush with out the reforms on the banking . The Act should be reintroduced with tighter controls in CONGRESS.

Mar 06 08:48 AM

[Boone Oracle:]

Not all banks (particularly some of the Regionals) that took TARP funds needed it. Some thought it was just an opportunity to secure a relatively cheap backup funds not realizing the strings to be attached after the fact. Some were actually coerced into accepting funds and then "urged" to bail out smaller floundering banks. Bottom line is the whole thing stinks and is another example of if it can be screwed up government will find a way. If Treasury had just stayed out of the way and let the fools fail, the worst would have been behind us by now. As it is we are looking at at least two more years of carnage and uncertainty.

Mar 06 10:40 AM

[This whole ...:]

That Eddie Murphy where he was shorting oj futures and he was going to try to bankrupt the two elderly NYSE members...Trading Places...except this is real...so when does one jump back in?

Mar 06 12:46 PM

[Mark Riddix:]

I own stock in Wells Fargo, Bank of America and JPMorgan actually. I hate seeing these dividend cuts but realize that they are essential to maintaining capital levels.


On Mar 05 06:31 AM oceansmike wrote:

> Mark, 1. Its being pounded lower by Shorts and Naked shorts , and
> 2. Why are so many short traders so interested in WFC well being,,
> as a Long I need the Dividend, 3. the shorts have ruined every other
> Company stock I own,, so the moral of the story are you a Wolf in
> Sheeps Clothing a News Journalist fronting for one of the Hedge Funds
> (who every one and his grandmothers Knows is a front for Naked Shorts,,ok
> said my peace,,Please don't do any more help to WFC ,,Cramer does
> enough for the financials,,one day you'll have to go back to using
> a Piggy Bank (or Mattress) ,,Thanks for your Understanding,,.,,Ocea...

Mar 09 12:29 AM

[Mark Riddix:]

Excellent Points.


On Mar 05 06:25 PM philipmax wrote:

> I do agree with you, greedcanbegood, that there is a big difference
> between investment banking as conducted by Citi and JPMorganChase
> and plain vanilla banking such as USB and PNC. But the market isn't
> taking the time to differentiate .
> I have great faith in the "good banks" but they stood in line to
> get the TARP and I don't see them refuting the excesses that are
> attributed to the others.
>
> There is no doubt in my mind that the repeal of the Glass-Steagle
> act in 1997 was the ignition point for this debacle. It took ten
> more years of unabated greed supported by the total lack of supervision
> and enforcement to get us here.
> So, any bank that takes TARP money and reduces its dividend and still
> reporting large reserves for bad debt, is probably hiding some shenanigans
> in its balance sheet. And... Yes, the management should bear responsibility,
> either by resigning or by reducing its bloated pay scales. As to
> stock options, for what? Pray tell, for what? Why should we the stockholders
> have to suffer dilution of our equity (be it ever so small) at the
> expense of mismanagement.? I stand pat with my demands and would
> like to add that there ought to be some indictments coming soon or
> there may well be an unwelcome surge in "other" crimes in this country
> as the population reacts to injustice.

Mar 09 12:31 AM