Wells Fargo & Company (NYSE: WFC) today released the results of its company-run stress test conducted in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA). The results can be found at: https://www.wellsfargo.com/invest_relations/stress-test-reports.
The Federal Reserve has published the results of its supervisory-run DFA stress tests for thirty of the nation’s largest banks, including Wells Fargo, using the DFA standardized capital distribution requirements. Under a hypothetical severely adverse economic scenario developed by the Federal Reserve and using the standardized capital distribution assumptions specified in the DFA, the Federal Reserve estimated that for the nine-quarter test horizon ending December 31, 2015, Wells Fargo’s lowest and ending Tier 1 Common Equity ratio under Basel I would each be 8.2%. Using the same economic scenario and capital distribution assumptions, we estimate that our lowest and ending Tier 1 Common Equity ratio would be 9.7% and 11.0%, respectively.
In addition to the Tier 1 Common Equity ratio calculated under Basel I, the Federal Reserve has added into the stress test analysis a Common Equity Tier 1 calculation under Basel III using the standardized capital risk-based approach. The Federal Reserve estimated that for the nine-quarter test horizon ending December 31, 2015, Wells Fargo’s lowest and ending Common Equity Tier 1 ratio under Basel III would each be 7.4%. We estimate that our lowest and ending Common Equity Tier 1 ratio under the same economic scenario and capital distribution assumptions would be 9.2% and 9.8%, respectively.
Under both our and the Federal Reserve’s calculations, Wells Fargo’s capital ratios under Basel I and Basel III remain above the Federal Reserve’s minimum Tier 1 Common Equity ratio of 5.0% and Common Equity Tier 1 ratio of 4.5%, respectively. The Federal Reserve has indicated that on March 26, 2014, it will release its estimates of Wells Fargo’s capital ratios using the same financial assumptions, but with our planned capital actions for the two-year forecast horizon.
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