Goldman Sachs Comments on Round Two of Bank Stress Tests (C) (JPM) (WFC) (BK) (AXP) (COF) (HBAN) (PNC)
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Price: $62.47 -0.32%
Rating Summary:
24 Buy, 13 Hold, 2 Sell
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Today's Overall Ratings:
Up: 13 | Down: 11 | New: 14
Rating Summary:
24 Buy, 13 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 11 | New: 14
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The Federal Reserve on Wednesday announced it has approved the capital plans of 25 bank holding companies participating in the Comprehensive Capital Analysis and Review (CCAR). The Federal Reserve objected to the plans of the other five participating firms--four based on qualitative concerns and one because it did not meet a minimum post-stress capital requirement.
Commenting on developments, analyst Richard Ramsden of Goldman Sachs noted capital returns moved higher but gains were slow.
"Capital returns are set to inch higher, as payout ratios increased to 62% (+4pp YoY). This year also saw capital returns further bifurcate between subsectors, as credit cards (led by AXP (NYSE: AXP), COF (NYSE: COF)) and trust banks (BK) (NYSE: BK) were clear winners, while regional banks increased returns but generally fell short of expectations (with HBAN (Nasdaq: HBAN) and PNC (NYSE: PNC) the exceptions). Large-caps brought up the rear, as results were mixed (JPM (NYSE: JPM) & WFC (NYSE: WFC) were positives)," said Ramsden.
"CCAR highlighted the challenges large-caps have in returning excess capital as: 1) Citi's (NYCE: C) qualitative failure underscores the capital return process is unpredictable, 2) BAC's (NYSE: BAC) resubmission (which admittedly is a better outcome than recently reduced expectations) highlights that even well capitalized banks are bound by stressed capital and could have trouble returning outsized capital. For C, its 10% 2015 ROTCE target incorporated returning capital, which now appears unlikely, putting its target at risk," added the analyst.
For an analyst ratings summary and ratings history on Citi click here. For more ratings news on Citi click here.
Shares of Citi closed at $50.16 yesterday.
Commenting on developments, analyst Richard Ramsden of Goldman Sachs noted capital returns moved higher but gains were slow.
"Capital returns are set to inch higher, as payout ratios increased to 62% (+4pp YoY). This year also saw capital returns further bifurcate between subsectors, as credit cards (led by AXP (NYSE: AXP), COF (NYSE: COF)) and trust banks (BK) (NYSE: BK) were clear winners, while regional banks increased returns but generally fell short of expectations (with HBAN (Nasdaq: HBAN) and PNC (NYSE: PNC) the exceptions). Large-caps brought up the rear, as results were mixed (JPM (NYSE: JPM) & WFC (NYSE: WFC) were positives)," said Ramsden.
"CCAR highlighted the challenges large-caps have in returning excess capital as: 1) Citi's (NYCE: C) qualitative failure underscores the capital return process is unpredictable, 2) BAC's (NYSE: BAC) resubmission (which admittedly is a better outcome than recently reduced expectations) highlights that even well capitalized banks are bound by stressed capital and could have trouble returning outsized capital. For C, its 10% 2015 ROTCE target incorporated returning capital, which now appears unlikely, putting its target at risk," added the analyst.
For an analyst ratings summary and ratings history on Citi click here. For more ratings news on Citi click here.
Shares of Citi closed at $50.16 yesterday.
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