Bank Stress Tests: No Big Deal

Updated from 11:23 a.m. EDT

Despite the heavy news coverage of rumored results and fretting among analysts and the public, the government stress test results expected to be unveiled Thursday are not likely to tell investors anything they didn't already know.

Wells Fargo (WFC Quote) Chairman Richard Kovacevich made headlines in March by calling the tests "asinine," noting that banks routinely stress test all of their portfolios, and share the results with regulators. Furthermore, analysts perform similar tests independently, and use them as the basis of reports on a weekly if not daily basis, advising investors on whether to buy, sell or hold bank stocks.

Once the government released its stress test metrics -- the GDP declines, unemployment rates and implied loan losses that are expected under a variety of economic "scenarios" -- the tests became even less of a mystery, and investors seemed even less concerned about the results. As the rumor mill churned out word on Monday that 10 out of 19 major banks undergoing stress tests would need additional capital, the market continued its charge upward, sending the S&P 500 into positive territory for the year.

"They've been leaking information all week, so as long as they don't surprise the market, I think we're out of the woods for the near term," says Brenda Wenning, president of Wenning Investments. "I don't think anyone's surprised that banks need more capital."

The question seems not to be whether, but rather how much capital banks will need. Unconfirmed reports citing anonymous sources have pegged the government's estimate of shortfalls at both Bank of America (BAC Quote) and Citigroup (C Quote) in anywhere between $10 billion and $34 billion. A New York Times report on Wednesday put BofA's shortfall at $34 billion, but that amount could be satisfied by converting the government's preferred equity stake into common shares. Other unconfirmed reports said Wells Fargo will be pushed to raise more capital as well, though specific figures were not disclosed.

On the flip side, American Express (AXP Quote), JPMorgan Chase (JPM Quote) and Bank of New York Mellon (BK Quote) do not need more capital, The Associated Press reported Wednesday.