The Banking and Strategy Initiative

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Bank Stress Tests 2012: Banks lose $500 bln in 9 quarters at 6.1% Tier I common

JP Morgan’s early Dividend boost announcement with a large buyback program for 2012 encouraged the Fed to bring back the schedule for the Stress Tests and announce the same in the afternoon today at the close of the market whence Citi unfortunately ticked down as it had failed to reach the equity benchmarks , having planned to finsih capital raising in 2012. Citi’s plans for Dividend and Buyback could also still survive.

Metlife, Ally, Suntrust and Citi lead the way down

19 Banks that were subjected to Stress, lose a notional $600 bln in the 9 quarters to December 2013 with Tier I coming to a 6.1% , above the 5% mark for Tier I common, from a starting 10.1% Tier I Common ratio for the 19 banks. However , Metlife scraped thru the Common Equity test with 5.1% ratio but Total Risk Based Capital computation based on the Fed’s banking stress test methodology has been identified and is likely the reaason the ‘bank’ failed the test. Metlife did get back to the Fed with some unkind words in writing on the subject and there is likely to be a “back and forth” on the same.

Ally Financials ( probably because of the legacy Mortgages book) , Suntrust and Citi also failed to pass the 5% mark in Tier I common ratio, falling between 4-6% in the test.

Banks upgrade earnings, dividends and announce buybacks

Banks that passed are obviously celebrating with Dividend hikes and buyback programs from JP Morgan, Wells Fargo and BB&T . Goldman Sachs also announced a buyback program in the wake of its ratings being upped on expectations of higher trading profits earlier in the afternoon as the FOMC went along expected lines. The buyback program details

The JP Morgan dividend has been upped to $0.30 cents, Wells Fargo $0.22 , BB& T $0.20 cents and US Bancorp increasing dividend 56% to $0.78 cents. Goldman Sachs and JP Morgan popped 6% in the last hour of trading to $124 and $43.35 on the good news. JP Morgan dividend increased by 20%, BB&T 25% as JP Morgan’s $15 bln buyback program is likely to be matched by Goldman Sachs and others, Citi likely looking for a second chance after completing capital raising in the works. It has already returned the bailout moneys of more than $40 bln to the Fed

15 banks passed the test including Bank of America. Bank of America however still needs to ask the Fed for giving Dividend and after it was rejected last year is taking no chances with the Fed this year despite having aced this exam.

The Fed also agreed to BB&T’s plans to expire $3.2 bln in Trust preferred securities in 2012 and pay a 25% higher dividend

Here’s the latest on the big Wall Street Banks

Bank Results 2012

Bonds are Back

JP Morgan flies with the Fund experts

Small deals in the West Coast banking scene


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This entry was posted on March 13, 2012 by in Amitonomics, Banking, Financial Services, Global, US and tagged , , , , , , , .


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