Stress Tests Won't Change Earnings

NEW YORK ( TheStreet) -- Stock buyback announcements by large cap banks following the Federal Reserve's "stress test" have led to big share price gains even though the earnings per share impact is minimal, according to a research report from Stifel Nicolaus published Thursday.

Comerica ( CMA), Huntington Bancshares ( HBAN), JPMorgan Chase ( JPM), KeyCorp ( KEY) and USBancorp ( USB) are the five banks covered by Stifel analyst Chris Mutascio that announced specific buyback plans. Those buybacks point to upward EPS revisions of less than 1% on average, but have driven share price gains of just under 7%, according to the report.

Buybacks by Comerica and Huntington were both larger than expected, according to research from Keefe Bruyette & Woods. The analysts see further share price gains for Comerica Thursday,

KBW analysts say a dividend increase by Comerica was in line with expectations, while Huntington did not announce a dividend hike.

RBC Capital Markets analysts left their estimates unchanged for KeyCorp following the buyback since they had already factored in a share repurchase.

Nonetheless, they argued the stress test results "demonstrated the resilience of the bank's capital position."

FBR Capital Markets analysts highlighted both JPMorgan and US Bancorp among the "winners" from the stress tests since buybacks were larger than they expected for both banks. Both banks also announced dividend increases.

FBR's analysts went on to argue that "banks have traded at a material discount to other sectors following the financial crisis," but that the disclosures "will help investors get more comfortable with the economic sensitivity of banks."

-- Written by Dan Freed in New York.

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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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