The Federal Reserve is going to let us know this afternoon just how well all the big U.S. banks fared in its balance sheet test scenarios.
These revelations were planned for after the market close on Thursday. But it turns out the news is slated for 4:30 p.m. today. The press release on results is here.
After JPMorgan Chase (JPM) revealed its dividend hike and buyback this afternoon, the cat seems out of the bag. JPMorgan’s overconfidence sent its stock, that of other big banks and the market skyrocketing higher. Bank of America (BAC) shares closed up 6.3%, while JPMorgan shares rose 7% and Citigroup (C) shares spiked 6%.
The Wall Street Journal is reporting that Bank of America passed the Fed’s stress tests, but isn’t going to raise its four-cent quarterly dividend or seek authorization to buy its own stock. Fitch, the ratings agency, said it expects all of its rated U.S. banks to pass the Fed’s Comprehensive Capital Analysis and Review (CCAR) based on its own estimates of losses in adverse scenarios.
Fitch said in a prepared release that its stress tests indicate:
“The average Tier 1 common (T1C) ratio will decline to 8.2% from 9.7% under the adverse scenario for the four largest diversified U.S. banks and eight largest regional banks. This average is well above the regulatory minimum of 5% required to pass.”
Goldman Sachs (GS) and Morgan Stanley (MS), with their focus on capital markets, were excluded from Fitch’s estimates, but it expects them to pass given high T1C ratios and smaller credit portfolios. Ditto for processing banks Bank of New York Mellon (BK), State Street (STT) and Northern Trust (NTRS) benefit from strong T1C ratios and have lower-risk business models.
