Oppenheimer's Kotowski notes that Citi's historical loan losses were much lower than that projected in the tests. The bank's actual First Lien Mortgage delinquency and non-accruals, for instance, were lower than that of Bank of America and JPMorgan last year.
"This test is not a methodical apples-to-apples comparison," said David Konrad, analyst at KBW, who was not too surprised by the loss rate projections. "A lot of it is qualitative."
Konrad does not believe investors should rush to any conclusions based on the Fed's loss projections about Bank of America and Citigroup one way or the other, noting that it is an academic exercise and not indicative of future performance.
He does believe, however, that the stress tests have put capital adequacy concerns for both banks to rest."For both Bank of America and Citigroup to be above 5% at the end of the stress tests means it is time to move past concerns about the risk of the balance sheet," said Konrad, noting that Citigroup entered the crisis with less than 5% in capital and has come a long way in building its balance sheet. The more immediate concern for investors then would be whether Citi will actually get approval for a revised plan.
Citi Investors in "Penalty Box"Citigroup has said it plans to resubmit its capital plans to the regulator later in the year. But it remains unclear what level of capital the Fed would currently be comfortable with for Citi to allow a buyback.
>To contact the writer of this article, click here: Shanthi Bharatwaj. >To follow the writer on Twitter, go to http://twitter.com/shavenk. >To submit a news tip, send an email to: email@example.com.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $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
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV