Goldman Sachs Comments on Bank Stress Tests (COF) (C) (WFC) (JPM) (MTB) (BAC)(MS)
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24 Buy, 13 Hold, 2 Sell
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Up: 11 | Down: 12 | New: 13
Rating Summary:
24 Buy, 13 Hold, 2 Sell
Rating Trend: Up
Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
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The Fed's latest stress test showed 29 of 30 of the U.S.'s largest banks meet the top capital target of the test. Zion Bancorp (NASDAQ: ZION) was the only firm that failed to meet the stress test's target. In the view of Goldman Sachs, the Fed stress test implies a large capital buffer.
"In aggregate, stress test results imply a more benign credit environment (6.9% loss rates vs. 7.5% last year) and relatively stable pre-provision earnings power," said analyst Richard Ramsden. "We view results as most positive for COF (NYSE: COF) and C (NYSE: C), given the most debate around their capital returns. Additionally, RF (NYSE: RF), STI (NYSE: STI), PNC (NYSE: PNC), WFC (NYSE: WFC) and all trust banks screen as having considerably more excess capital than return expectations. While JPM (NYSE: JPM) and MS (NYSE: MS) also screen well, we expect both to be conservative on capital return asks."
"On the downside, we worry most about BAC (NYSE: BAC) as we estimate only $6.5bn (ann’l) of excess capital vs. $6-7bn in expected return. The fact that MTB's (NYSE: MTB) results include HCBK could give the market some comfort that the deal should close in 2014/2015. While ZION was the only bank to fail, it noted it will be re-submitting (containing actions to reduce risk, and/or increase common). DFS (NYSE: DFS) announced a $1.6bn buyback which may be on the lower end of expectations (we adjust estimates for this)," he added.
"In aggregate, stress test results imply a more benign credit environment (6.9% loss rates vs. 7.5% last year) and relatively stable pre-provision earnings power," said analyst Richard Ramsden. "We view results as most positive for COF (NYSE: COF) and C (NYSE: C), given the most debate around their capital returns. Additionally, RF (NYSE: RF), STI (NYSE: STI), PNC (NYSE: PNC), WFC (NYSE: WFC) and all trust banks screen as having considerably more excess capital than return expectations. While JPM (NYSE: JPM) and MS (NYSE: MS) also screen well, we expect both to be conservative on capital return asks."
"On the downside, we worry most about BAC (NYSE: BAC) as we estimate only $6.5bn (ann’l) of excess capital vs. $6-7bn in expected return. The fact that MTB's (NYSE: MTB) results include HCBK could give the market some comfort that the deal should close in 2014/2015. While ZION was the only bank to fail, it noted it will be re-submitting (containing actions to reduce risk, and/or increase common). DFS (NYSE: DFS) announced a $1.6bn buyback which may be on the lower end of expectations (we adjust estimates for this)," he added.
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