We're Boosting These Price Targets on Post Stress Test Dividend Hikes
Strength in investment banking activity may lead to further target revisions.
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Whether it’s a golfer’s swing, a baseball batter’s swing, or banks passing Federal Reserve stress tests, follow-through is important. In the case of the Fed's stress tests, last Friday we learned that all 22 banks tested remained above their minimum CET1 capital requirements, and last night we started to see the follow-through we’ve been waiting for – dividend increases, and in some cases, reauthorizations of share-repurchase programs.
In our June Monthly Roundup, we said that we would revisit our price targets for Morgan Stanley MS and Bank of America BAC, as needed, to account for their post-stress tests announcements. Well, that’s what we’re doing this morning.
We are taking our MS price target to $150 from $145, and BAC's to $55 from $50, reflecting both companies announcing 8% increases in their respective quarterly dividends. That brings Morgan Stanley's quarterly dividend to $1.00 per share, up from $0.925, and BofA’s to $0.28 per share, from $0.26.
Those dividend increases will begin with Q3 2025 payments, which have historically been paid in August and September. In addition, Morgan Stanley reauthorized a multi-year common equity share repurchase program of up to $20 billion, without a set expiration date, beginning in the third quarter of 2025.
As we make these latest adjustments, we will reiterate that based on the strength of investment banking activity in the coming months, we will revisit these new price targets as necessary.
Both BofA and Morgan Stanley will report their June-quarter financial results on July 16. Ahead of those reports, we’ll be digging into results from JPMorgan Chase JPM, Citigroup C, and Wells Fargo WFC on July 15.
At the time of publication, TheStreet Pro Portfolio was long MS and BAC.
