U.S. banks slowed their common share repurchases in the first quarter following accelerated buybacks in 2021.
In total, banks bought back $12.77 billion in common shares during the period ended March 31, down from $13.51 billion in the first quarter of 2021 and $14.12 billion in the fourth quarter of 2021, according to S&P Global Market Intelligence data.
The first-quarter buyback amount is still significantly higher than the roughly $3.20 billion of repurchases recorded from the second quarter through the fourth quarter of 2020. During that period, the Federal Reserve restricted capital distributions by big banks, and many banks suspended repurchase programs due to the COVID-19 pandemic.
Top repurchasers
Three of the "Big Four" U.S. banks — Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. — topped the list of U.S. banks with the most common share repurchases in the first quarter.
Citigroup bought back $3.16 billion in common shares in the period, up $1.37 billion on a yearly basis. On the company's first-quarter earnings call, CEO Jane Fraser said Citigroup is expecting "only a modest" level of buybacks in the second quarter. She cautioned that the macro and geopolitical environment and the effect of Citigroup's divestitures will have a mixed effect on the company's capital ratios in 2022, impacting the level of buybacks for the year.
Bank of America, whose buybacks dropped $820.0 million year over year to $2.65 billion, also expects to slightly slow repurchases, Chairman and CEO Brian Moynihan said at a June 1 conference. While buybacks will continue, he added, "It's just to be a little more balanced."
JPMorgan's repurchases were down $2.35 billion on a year-over-year basis to $2.46 billion, and company executives also hinted at slower buybacks. The rate of repurchases is "clearly" going to be lower in the current environment than in 2021, "and that's a good thing," CFO Jeremy Barnum said on the bank's first-quarter earnings call. "It means that we have better uses for the capital."
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Other banks, such as Webster Financial Corp., Cadence Bank and First BanCorp., said they will be opportunistic in buying back stocks. Webster plans to use some of its buyback authorization over the next three to four quarters if it does not have options for organic investment and does not anticipate a recession, President and CEO John Ciulla said on the company's first-quarter earnings call.
Buybacks back in the spotlight?
Buyback outlooks have flagged as the recent surge in interest rates hammered the market value of banks' bond portfolios. But analysts at Hovde Group see the possibility of repurchases coming back into focus, considering there is likely a pause on bank M&A as sellers seek higher prices.
"Lower stock prices mean sellers' expectations are not going to be met," Hovde analysts wrote in a May 4 note. "We think some banks may utilize share repurchases in the current environment."