3 Bank Stress Test Winners

NEW YORK ( TheStreet) -- The results of the Federal Reserve's annual bank stress tests are a mixed bag, but Jefferies analyst Ken Usdin on Wednesday highlighted three as "relative winners," based on the regulator's approval of their capital plans.

The 19 large, complex bank holding companies subject to the Fed's Comprehensive Capital Analysis and Review (CCAR) for 2012 were stress-tested under a severe economic scenario. The results had to show that the group of 19's estimated Tier 1 common equity ratios would remain over 5% under the adverse economic scenario to pass Fed muster.

In order to have their capital plans approved, the companies' estimated Tier 1 capital ratios at the end of 2013 would have to be above 5%, "with all proposed capital actions through Q4 2013."

Following JPMorgan Chase's announcement that it would raise its dividend by a nickel to 30 cents and that it had authorized $15 billion in share repurchases, the Fed moved up its schedule by two days, to announce the stress test results at 4:30 Tuesday.

One of the biggest sources of relief to investors was that Bank of America ( BAC) passed the tests, with an estimated Tier 1 common equity ratio under the adverse economic scenario of 5.7%, increasing to an estimated 5.9% at the end of 2013.

Some analysts thought that Bank of America might fail the stress tests, even though the company did not include any plans for increases to its dividend or for share buybacks in its capital plan.

KBW analyst Jefferson Harralson had said on Monday said that Bank of America's estimated Basel 1 Tier 1 common equity ratio could have wound up at 4.66% according to the Fed's stress test scenario, which could have brought tremendous pressure on the shares.

Usdin on Wednesday pointed out that stress test results for SunTrust ( STI) and Fifth Third Bancorp ( FITB) "disappointed, as the Fed objected to certain aspects of their plans, adding that "for smaller banks yet to report," he saw Comerica ( CMA), Huntington Bancshares ( HBAN) and Northern Trust ( NTRS) as "best positioned to increase payouts this year."

Please see TheStreet's stress test failure roundup for more on SunTrust and Fifth Third.

The following are the three bank holding companies that Usdin says surprised "to the upside" in their approved capital payouts:

KeyCorp

Shares of KeyCorp ( KEY) of Cleveland were up over 1% in morning trading Wednesday, to $8.36.

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The shares were up 8% year-to-date, through Tuesday's close at $8.26.

According to the Fed's stress test results, KeyCorp'e estimated Tier 1 common equity ratio under the adverse economic scenario would be 6.3%, dropping to an estimated 5.3% at the end of 2013, if the company were to follow through with its submitted capital plan.

KeyCorp was granted permission to increase its quarterly dividend to five cents from three cents, and announced that its board of directors would "consider the potential dividend increase at its regular May meeting."

The company also announced that it had authorized "a common stock repurchase program of up to $344 million."

Usdin rates KeyCorp a "Hold" with a $9.50 price target, and estimates the company will earn 70 cents a share in 2012, followed by EPS of 75 cents in 2013.

Interested in more on KeyCorp? See TheStreet Ratings' report card for this stock.

PNC Financial Services Group

Shares of PNC Financial Services Group ( PNC) of Pittsburgh were down over 1% in morning trading Wednesday, to $61.27.

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The shares were up 8% year-to-date, through Tuesday's close at $61.94.

The Fed estimated that under its adverse economic scenario, PNC's estimated Tier 1 common equity ratio would be 6.6%, falling to 5.9% at the end of 2013, if the company returned capital according to its submitted plan.

PNC announced that the Federal Reserve had "accepted its capital plan and did not object to the capital actions, which included recommendations to increase the quarterly common stock dividend in the second quarter of 2012 and a modest share repurchase program under PNC's existing common stock repurchase authorization."

PNC is currently paying a quarterly dividend of 35 cents a share, for a yield of 2.26%, based on Tuesday's closing price.

The company's current buyback program authorizes the repurchase of up to 24.7 million shares.

Usdin rates PNC a "Buy" with a $66 price target, and estimates the company will earn $6.05 a share during 2013, followed by EPS of $6.35 in 2013.

Interested in more on PNC? See TheStreet Ratings' report card for this stock.

U.S. Bancorp

Shares of U.S. Bancorp ( USB) of Minneapolis were up slightly in morning trading on Wednesday, to $31.07.

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The shares were up 15% year-to-date, through Tuesday's close at $31.01.

U.S. Bancorp currently pays a quarterly dividend of 12.5 cents, for a yield of 1.61%, based on Tuesday's closing share price.

The Federal Reserve estimated that under its adverse economic scenario, U.S. Bancorp's Tier 1 common equity ratio would be 7.7%, falling to 5.4% if the company were to follow through with its submitted capital plan.

U.S. Bancorp announced that it would increase the quarterly dividend to 19.5 cents and that it had authorized a new program to buy back up to 100 million shares, replacing the company's previous buyback program.

U.S. Bancorp is one of the more expensive stocks among the nation's largest bank holding companies, with shares trading for 2.9 times tangible book value, according to HighlineFI. The shares trade for 11.5 times the consensus 2012 EPS estimate of $2.69, among analysts polled by Thomson Reuters. The 2012 EPS estimate is $2.92.

The stock's relatively high valuation to book reflects its strong earnings performance, with quarterly returns on average assets increasing steadily from 1.36% to 1.61% during 2011.

Usdin rates U.S. Bancorp a "Hold," wiith a $30 price target, and estimates the company will earn $2.65 a share in 2012, followed by EPS of $2.80 in 2013.

Interested in more on U.S. Bancorp? See TheStreet Ratings' report card for this stock.

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

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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.

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