This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Zions, Citi: Stress Test Winner & Loser

Stocks in this article: BAC C ZION

Updated to include a discussion on Citigroup's stress test failure, and with closing prices and updated returns.

NEW YORK ( TheStreet) -- Zions (ZION - Get Report) was the big winner among the largest U.S. banking names on Wednesday, with shares rising 10.5% to close at $21.58.

Investors cheered the Salt Lake City lender's announcement that t had received the Federal Reserve's permission to repay federal bailout funds received through the Troubled Assets Relief Program, or TARP, without raising common equity.

JPMorgan Chase (JPM) started the stress test party Tuesday afternoon, while the market was still open, by announcing an increase of its quarterly dividend to 30 cents from 25 cents, and a $15 billion stock buyback plan. This caused the Federal Reserve to move up its public stress test announcement by two days, to Tuesday, following the market close.

The broad indexes were mixed on Wednesday, while the The KBW Bank Index (I:BKX) rose over 1% to close at 48.12, following Tuesday's 5% increase heading into the stress test results announcement.

Bank of America (BAC - Get Report) was a big winner in the stress tests, even though the company didn't request permission from the Fed to increase its one-cent quarterly dividend or to buy back shares.

The Federal Reserve enhanced its regulatory credibility by basing the stress tests on a particularly harsh economic scenario, included real U.S. GDP contracting "sharply through late 2012, with the unemployment rate reaching a peak of just over 13 percent in mid-2013," while also assuming "that U.S. equity prices fall by 50 percent from their Q3 2011 values through late 2012 and that U.S. house prices fall by more than 20% through the end of 2013." In addition, under the Fed's adverse scenario, "foreign real GDP growth is also assumed to contract, with growth slowdowns in Europe and Asia in 2012."

Investors breathed a sigh of relief, sending Bank of America's shares up over 4% on Wednesday, to close at $8.85, following a 6% increase the previous session, after the company passed the stress tests with flying colors.

In its stress test results announcement, the Federal Reserve estimated that Bank of America's Tier 1 common equity ratio under the adverse economic scenario would be 5.7%, increasing to an estimated 5.9% at the end of 2013.

Some analysts had thought that Bank of America might fail the stress tests with an estimated Tier 1 common ratio below 5% under the economic scenario.

Bank of America's have now risen 59% year-to-date, following a 58% drop during 2011.

Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,461.51 -217.19 -1.23%
S&P 500 2,042.01 -15.08 -0.73%
NASDAQ 4,719.1180 -52.6450 -1.10%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs