Jim Trippon CPA

Now that Dow components Bank of America (NYSE: BAC) and JPMorgan Chase (NYSE: JPM), the two largest U.S. banks respectively, have reported their first-quarter earnings, the race to see which of the largest U.S. banks will be the first to raise their dividend. Both banks delivered solid earnings reports that handily beat analysts' estimates, but the positive reaction to JPMorgan's earnings was thrown out the window on Friday as the Goldman Sachs (NYSE: GS) fraud news derailed the entire market. Bank of America never even got out of the block, held back by the same news.

It's an interesting time for the financial services sector. Investors in this sector have to contend with the Goldman news and Citigroup (NYSE: C), Goldman, Wells Fargo (NYSE: WFC) along with a spate of regional banks report earnings next week. Let's be honest, despite the nice run Citi shares have enjoyed recently, it would be startling to see that bank beat JPMorgan and BofA to the dividend punch.

If Wells Fargo reports a solid quarter AND shows that it is setting aside less cash for bad loans, a la JPMorgan, Wells could be a dark horse to win this race, but that's tough bet to make. It may not be surprising to see Wells beat BofA to a dividend increase, but beating JPMorgan is another case altogether.

So we're probably not going out on a limb when we say JPMorgan Chase will get around to a dividend increase sometime before 2010 is over and BofA may follow suit, although it could be early next before that bank ratchets its payout higher. Looking for a real darkhorse that could beat all of these names to the finish line? BB&T (NYSE: BBT) is one name to watch.

Unfortunately, there are "X" factors weighing on this group. Goldman's fraud case is one. The other is the progress the financial reform package is making on Capitol Hill. Without knowing what kind of capital reserves they need to carry, big banks may use that as an excuse to keep their dividends paltry for now.