Santander and Deutsche Bank US arms fail Fed stress tests

Deutsche Bank and Banco Santander's US units both came in for censure from the Federal Reserve for the second year running, as the pair were the only banks to fail the regulatory stress tests.

Santander's subsidiary has now failed the test three years in a row, though the Spanish parent company assured that it would not affect its dividend policy in Spain.

Chairwoman Ana Botin said in January she would consider selling the unit but would first fix its problems within the next two years.

Regulators felt there were ongoing "broad and substantial weaknesses" in both banks' capital planning.

Morgan Stanley was granted conditional approval on the basis that it will address certain weaknesses and submit a new capital plan by the end of the year.

Of the 33 banks tested for whether they can weather a major economic downturn, 30 were approved, with native banks such as Bank of America, JPMorgan Chase, Citigroup, Goldman Sachs all given passes, along with overseas banks including HSBC's North America arm, approving their individual plans to distribute profits.

Immediately after the announcement after the close of stock market trading on Wall Street, almost all institutions confirmed increases to their shareholder returns.

For example, even with only conditional approval, Morgan Stanley increased its dividend to 20 cents per share from 15 and announced a $3.5bn stock buyback program.

Bank of America increased its dividend 50% to $0.075 and authorised a $5bn buyback, JPMorgan Chase announced a $10.6bn purchase of treasury shares, and Citigroup raised its dividend to 16 cents per share and announced a $8.6bn buyback, while Goldman said its plans for a stock buyback and dividend hike were approve but did not elaborate on detail.