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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Regulators Double Basel III Capital Requirement (Update 1)

Stocks in this article: BAC C JPM WFC MS GS

Mosby has a more positive viewpoint on positioning of the big banks for compliance with a 6% supplementary Basel III Tier 1 leverage ratio. He estimated last week that as of March 31, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo had supplementary Basel III Tier 1 leverage ratios in excess of 6%.

According to Mosby, large banks with less than 6% estimate supplementary Basel III Tier 1 leverage ratios as of March 31 included Goldman Sachs, with a 5.91% ratio; Morgan Stanley, with a 4.46% ratio; Bank of New York Mellon, at 4.54%; and State Street, at 5.93%.

Estimating the supplementary Basel III Tier 1 leverage ratio "depends on what you are incorporating off balance sheet," according to Mosby. "We are looking at the fair value of those off-balance sheet items, and trying to layer them in to calculate the supplementary ratio."

Dividends and Share Repurchases

Mosby expects the new rules to have no effect on banks' dividend payouts, "because they are limited to 30% of earnings anyway, and the regulators have no interest in suppressing dividend payments. What we are really looking at is how much they can add on top of that for share repurchases?"

According to Mosby, large banks have been seeking eventually to add share repurchases equivalent to 40% to 50% of earnings, for combined returns of capital of 70% to 80% of earnings.

"The question now is whether the higher constraints make banks retain more of their retained earnings going forward, to trim total payout to 60% rather than 70% to 80%," he says.

The ongoing market rally for bank stocks continued on Tuesday, despite the proposed increase in regulatory capita requirements. The KBW Bank Index (I:BKX) was up 0.5% to 64.63 in afternoon trading, with all but five of the index components showing gains.

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
3 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 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

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