This Day On The Street
Continue to site
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

JPMorgan, Other Big Banks Juiced by Mid-Year Stress Tests

NEW YORK ( TheStreet) -- The nation's largest banks have sailed through yet another set of stress tests mandated by regulators, showing "the industry is well positioned to increase capital distributions" next year, according to Sterne Agee analyst Todd Hagerman.

Hagerman in a note to clients late on Monday wrote that "the bank-conducted stress-testing results, which extend through 2Q15, demonstrated continued improvement in the trajectory of core profitability, improved expected cumulative loss rates, and higher levels of core capital."

Investors may be confused to be reading about stress tests during the summer, since the largest banks have been undergoing the Federal Reserve's stress tests for the past few years in March, after which the group has announced capital deployment plans for the following year. The good news is that the big banks have come out of this round of tests looking considerably stronger than they did before.

Back in March, the Fed first conducted its annual Dodd-Frank Act Stress Tests (DFAST), to gauge the 18 largest US. Bank holding companies' ability to maintain minimum Basel 1 Tier 1 common equity ratios of 5% through a "severely adverse" economic scenario that included a 4% increase in the unemployment rate, which would have been "above any level experienced over the last 70 years." The severely adverse scenario also included an increase of corporate bond spreads to Treasury bonds of 550 basis points, real GDP declining by 5%, a 50% drop in stock prices and a 20% decline in home prices through the end of 2014.

The stress tests in March were based on September 2012 financial data, and showed that all 18 holding companies would survive though the end of 2014 with minimum Tier 1 leverage ratios of at least 5%, except for Ally Financial, the former GMAC.

One week after the DFAST results were announced, the Fed incorporated banks' capital return plans into another set of stress tests using the same scenario -- the Comprehensive Capital Analysis and Review (CCAR). All the banks passed CCAR, except for Ally Financial and BB&T (BBT) of Winston-Salem, N.C., which had its capital plan rejected on "qualitative" grounds. JPMorgan Chase (JPM - Get Report) and Goldman Sachs (GS) received "conditional" approval for their capital plans, but were required to submit revised plans to the Federal Reserve.
1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr 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

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $14.80 0.03%
C $46.73 0.00%
JPM $63.60 0.00%
MS $27.23 0.00%
WFC $50.41 0.00%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs