Updated with comments from FIG Partners analyst Christopher Marinac about SunTrust and Regions Financial.
NEW YORK ( TheStreet) -- Even the strongest among the large U.S. banks subject to the Federal Reserve's third round of stress tests will feature a severe set of economic assumptions that will likely put a damper on dividend increases for even the strongest of the big
The third round of stress tests will begin early next year, with the original group of 19 large U.S. banks -- including the "big four" of JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC), as well as U.S. Bancorp (USB), PNC (PNC), Goldman Sachs (GS), Morgan Stanley (MS), and 11 other companies -- being joined by 12 more bank holding companies with over $50 billion in total assets, including Huntington Bancshares (HBAN), Discover Financial Services (DFS) Northern Trust (NTRS), M&T Bank (MTB), Comerica (CMA), and Zions Bancorporation (ZION).
|Banks execs planning dividends will feel sharp pains following Fed stress testing.|
The banks subject to the stress tests are required to submit their detailed 2012 capital plans -- including any plans to increase a return of capital to investors through increased dividends or share buybacks -- by January 9, and will have their plans approved or rejected by the Federal Reserve by March 15.According to FIG Partners analyst John Rodis, "the metrics for the tests this time around will be a lot more stringent" than they were for the second round of stress tests earlier this year:
- Gross domestic product declining 4% vs. 1.5%.
- Unemployment reaching 13%, vs. 11%.
- Home prices falling 21% vs. 11%.
- Equity markets declining 52% vs. 27%.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV