Stress Test Preview: Banks Holding Up

There's no set method to calculate tangible equity ratios and SNL Financial, which provided the data for this article, follows a conservative approach. The holding company with the lowest tangible common equity ratio on the list is Bank of New York Mellon (BK), with a ratio of 1.63%, followed by Citigroup at 1.77%, State Street (STT) at 2.70% and PNC at 2.73%.

This points to another danger of focusing on the tangible common equity ratio. The low ratios for Bank of New York Mellon and State Street reflect the companies' business models focusing on custody services, asset management, wealth management and other services.

Texas Ratio

Another quick way of identifying potential risk is the ratio of nonperforming loans and securities to Tier 1 capital and loan loss reserves. This is also known as the Texas ratio. The listed company with the highest Texas ratio as of Dec. 31 was Bank of America (BAC), at 24.74%. However, the ratio doesn't reflect the $30 billion in new capital infusions from the Treasury during the first quarter.

Other listed companies with relatively high Texas ratios included Fifth Third (FITB), at 22.94% and SunTrust (STI) with a Texas ratio of 21.75%. Fifth Third also had a nonperforming assets ratio of 3.01% as of Dec. 31, the highest on the list.

Stock Performance

The following table includes stock price and return information as of Wednesday's market close:

Banking Companies Subject to Stress Tests - Stock Information ($Bil) SNL Financial

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