Stock buybacks reportedly are on track for the lowest total on record this quarter,
Many companies have suspended buybacks and dividends to preserve their cash flow, CNBC reported, citing Bank of America.
As a result, buybacks from the bank’s clients are on pace to fall roughly 90% in the second quarter compared with prior quarters.
“Buybacks remained extremely anemic, with QTD buybacks tracking just over $1bn — on pace for a record-low ~$2bn quarter in our data history,” Bank of America said in a note, CNBC said.
The coronavirus outbreak has put an end to a decade-long trend toward more companies buying back more of their own shares as firms try to slash spending and save cash wherever they can.
Just over half of the companies in the S&P 500 —a record high—and 26% of small-cap companies in the Russell 2000 bought back stock last year, Barron’s reported, citing Jefferies equity strategist Steven DeSanctis.
Suspending buyback programs has been a popular move, with firms such as JPMorgan Chase (JPM), AT&T (T), and McDonald’s (MCD) pausing repurchases for the time being.
Meanwhile, the Federal Reserve could curtail Wall Street banks’ ability to pay dividends by cranking up the amount of capital they need to maintain due to the coronavirus crisis, Governor Randal Quarles said Tuesday.
Quarles, the Fed’s vice chairman for supervision, said the central bank is adding a current-events analysis to its annual stress-testing process that could influence lenders’ ability to distribute capital, Bloomberg reported.
The impact of the economic meltdown caused by the global pandemic could shift the stress capital buffer that determines capital demands at the banks and how much they can return to shareholders, he told Senate Banking Committee members at a hearing held by video conference.
“We’re open-minded as to what the data will show,” said Quarles, who noted that the industry’s capital levels have made banks a source of strength during the crisis. He said he’s unaware of any institutions in danger of insolvency.
While the biggest banks have already agreed to suspend stock buybacks, Democratic lawmakers and consumer advocates have pushed for them to also suspend dividends and use their capital to help absorb the financial stresses of the crisis.
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