U.S. banks' common stock repurchases dropped in the third quarter as capital requirements faced upward pressure and the macroeconomic outlook weakened.
Overall, banks bought back $4.42 billion in common shares during the period ended Sept. 30, compared to $7.14 billion in the second quarter and $28.17 billion in the third quarter of 2021, according to an S&P Global Market Intelligence analysis.
Many large banks moved away from share repurchases after higher losses projected under the 2022 Federal Reserve stress tests drove capital requirements up. In 2023, however, buybacks will be a significant tool for U.S. public companies to boost EPS as they utilize cash to cut share count rather than grow their businesses.
Top repurchasers
PNC Financial Services Group Inc. logged the most buybacks in the third quarter, repurchasing $1.00 billion, up $628.0 million year over year.
The third-quarter amount was higher than the company's average purchase range of $700 million to $750 million, though that range is "just a rule of thumb," CFO Robert Reilly said on the company's earnings call.
"We can do more, we can do less as conditions were," Reilly said. "We will be purchasers of our shares in the fourth quarter, the amount of which will be determined based on conditions."
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Bank of America Corp. and Citigroup Inc., which had worse-than-expected Fed stress-test results, were the only banks among the "Big Four" to make the list of 20 banks with the most repurchases. BofA bought back $450.0 million, down $9.46 billion year over year, while Citi bought back $55.0 million, down $3.02 billion year over year.
BofA expects to continue buying back shares, though it is prioritizing growing its balance sheet and building up its stress capital buffer "a little bit more."
"We'll support the organic growth a little bit towards [the] buffer and [then] use the rest to send back to you guys," Chairman and CEO Brian Moynihan said on the company's third-quarter earnings call.
Citigroup CEO Jane Fraser said the company will take buyback decisions quarter by quarter.
"We will keep evaluating that decision on a quarterly basis … as we build our [Common Equity Tier 1] ratio to 13% or so by mid-next year, and that includes a management buffer of 100 basis points," Fraser said on the company's third-quarter earnings call.
First Citizens BancShares Inc. recorded the second-most repurchases among the companies included in the analysis, followed by M&T Bank Corp. First Citizens bought back $792.0 million in common shares, and M&T Bank repurchased $600.0 million. Neither company repurchased shares in the third quarter of 2021.
First Citizens was able to buy back shares quicker than anticipated, but it is pausing repurchases as it monitors "loan growth and the macroeconomic environment moving forward," Chairman and CEO Frank Holding Jr. said on the company's third-quarter earnings call.
