Shares in big banks climb as Fed approves capital plans

(Reuters) - Shares in the S&P 500 bank index <.SPXBK> rose about 2% on Friday after the U.S. Federal Reserve approved the capital plans of the biggest U.S. banks, giving them a clean bill of health.

M&T Bank Corp (NYSE: MTB) was the only one of the index's stocks down slightly as at least one analyst said its payout plan was lighter than expected. JPMorgan Chase & Co (NYSE: JPM), Bank of America (NYSE: BAC) and Citigroup (NYSE: C) were the group's biggest boosts with gains over 2%, followed by advances of about 2% for Wells Fargo & Co (NYSE: WFC).

All 18 banks undergoing the Fed's annual stress test were given the all-clear, although the central bank placed conditions on Credit Suisse's (NYSE: CS) U.S. operations after finding weaknesses in its capital planning processes.

The Fed's stamp of approval for Deutsche Bank was a major boost since it flunked the test in 2015, 2016 and 2018.

JPMorgan and Capital One (NYSE: COF) passed the test though both had to pare back their capital plans, after initial plans showed that each would see capital levels drop below regulatory minimums under a severe economic downturn, according to a senior Fed official.

Jefferies analyst Ken Usdin estimated that the average bank would be returning about 10.5% of its market capitalization in dividends and buybacks from the third quarter of 2019 to the second quarter of 2020. He said total payout ratios for universals averages at about 125% of net income estimates.

Bank of America, Bank of New York Mellon (NYSE: BK), JPMorgan, and Northern Trust Corp (NASDAQ: NTRS) had notably larger payouts than Usdin's estimates, while Capital One, Discover Financial Services (NYSE: DFS), and M&T were lightest compared with his estimates.

Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS) and State Street Corp (NYSE: STT), which received conditional passes last year, passed without conditions this year. Goldman Sachs, which is not in the S&P bank index was up more than 3%.

(Reporting by Sinéad Carew; Editing by Nick Zieminski)

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