Buybacks

Last year was a bumper year for buybacks in US banks, with Citi finally coming to the party and announcing a $20bn return to shareholders.

Overall, the six largest banks in the US returned over $100bn in dividends and buybacks in what was the biggest return of capital since 2021.

JPM CFO has also said there is likely more to come - "Given the amount of organic capital generation that we’re producing, it means that, unless we find in the near-term opportunities for organic deployment or otherwise, it means more capital return through buybacks, all else being equal, in order to arrest the growth of the excess, and that is our current plan.”

Buybacks can be a divisive subject, but my rule of thumb has always been to see them as a sign that executives cannot find higher return opportunities internally, and therefore it is more attractive to return the excess to their shareholders.

As the great and powerful Michael Mauboussin once said "A company should repurchase its shares when its stock is trading below its expected value and when no better investment opportunities are available."