US banks cut share buybacks by 74% YOY in Q4 2022

Common stock buybacks at US banks dropped in the fourth quarter of 2022 amid upward pressure on capital requirements.

Overall, banks bought back $3.73 billion in common shares in the period, a 73.6% decrease from $14.14 billion in the fourth quarter of 2021, according to an S&P Global Market Intelligence analysis. The fourth-quarter stock buybacks represent a 15.6% decline from $4.42 billion in the third quarter of 2022.

Banks repurchased $28.07 billion in common shares in full year 2022, down 62.6% from $74.99 billion in 2021, a year in which they accelerated buybacks after holding back in 2020 due to the COVID-19 pandemic and related restrictions.

Several large banks slowed their share-repurchase pace in 2022 relative to the prior year as higher losses projected under the year's Federal Reserve stress tests drove capital requirements up. In 2023, buybacks are expected to remain under pressure due in part to the possibility of tougher capital rules, especially as the Fed's harsh scenarios for this year's stress tests add pressure to capital requirements.

Top repurchasers

In full year 2022, Bank of America Corp. made the most common share repurchases at $5.07 billion, despite a 79.8% year-over-year drop.

Among the Big Four, Citigroup Inc. and JPMorgan Chase & Co. were also top repurchasers. Citi's buybacks decreased 54.7% to $3.59 billion, and JPMorgan's repurchases plummeted 82.8% to $3.16 billion.

At Bank of America, Citi and JPMorgan, regulatory thresholds for Tier 1 common equity ratios went up by 80 basis points to 100 basis points as a result of the 2022 stress tests.

Repurchases are on the lower end of JPMorgan's priorities for its capital, CFO Jeremy Barnum said on the bank's fourth-quarter 2022 earnings call.

"If we have better uses for the money, those will come first, and the timing and the conditions of how much we do when is entirely at our discretion," Barnum said.

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PNC Financial Services Group Inc. claimed the No. 2 spot after increasing its repurchases by 245.8% to $3.73 billion. PNC plans to continue its buyback program into 2023 but will repurchase shares at a reduced rate compared to 2022, CFO Robert Reilly said on the bank's fourth-quarter 2022 earnings call.

"Given all the uncertainties that we're seeing, obviously, we need to be smart and tactical in terms of our capital deployment as the year plays out," Reilly said. "Secondly, and just logically, the rate of repurchases slows when your capital ratios go from 10% to 9%."

The other banks with over $100 billion in assets on the list were M&T Bank Corp., First Citizens BancShares Inc., Regions Financial Corp. and Truist Financial Corp. In 2022, M&T Bank repurchased $1.8 billion in common shares, while First Citizens, Regions and Truist bought back $1.24 billion, $254.0 million and $250.0 million, respectively.