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Wells Fargo Gets a Gift From Fed

NEW YORK (TheStreet) -- Wells Fargo (WFC - Get Report)will be the biggest beneficiary from a tweak to an important new rule announced by the Federal Reserve after the market close Tuesday, according to a report from Keefe Bruyette and Woods.

The supplementary leverage ratio (SLR) rule will increase the capital cushion required for the eight largest U.S. banks, and while that will reduce returns for all of them, recent revisions to the the rule versus an earlier proposal will likely benefit Wells Fargo, according to KBW.

Wells Fargo "may see the most positive impact given the company's lower derivative exposure relatively and larger amount of commitments, which get more favorable treatment in the final rule versus [an earlier] proposed rule," the analysts write.

Citigroup (C) also said it would see a slight benefit from the revised rule while KBW analysts expect each of the other six to see a negative impact.  

Wells Fargo shares were down 0.06% to $48.80 shortly after the start of trading Wednesday, while Citigroup shares were also slightly negative and JPMorgan Chase (JPM) and Bank of America (BAC) shares were up by a few pennies.

The Fed's rule, which raises the SLR to more than 5% from about 2%, will take effect at the start of 2018, though KBW expects "most banks will reach the required minimums by year-end 2015 or earlier." 

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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