Tarpley & Underwood
Financial Advisors, LLC
RESULTS OF THE STRESS TESTS
Which Banks Did Well? Which Ones Didn’t?
The Worst-kept Secret in Washington Goes Public. Federal regulators have now released their “stress test” evaluations of America’s 19 largest banks. So how many of the 19 thrifts are adequately capitalized? Which banks will be directed to boost their capital, and where might that capital come from?
Information has been leaking for days. Now we have the official report and the Federal Reserve’s opinion.
Nine Banks Don’t Need More Capital. The banks in the best shape: American Express Co., BB&T Corp., Bank of New York Mellon Corp., Capital One Financial Corp., Goldman Sachs Group Inc., JPMorgan Chase & Co., MetLife Inc., State Street Corp. and US Bancorp. The government says these banks do not need to beef up their balance sheets.1
Ten Others Do. The government says these banks need to raise new capital or bolster capital reserves by the following amounts2:
- Bank of America
$33.9B
- Citigroup $5.5B
- Fifth Third Bancorp $1.1B
- GMAC LLC $11.5B
- KeyCorp $1.8B
- Morgan Stanley $1.8B
- PNC Financial Services$0.6B
- Regions Financial $2.5B
- SunTrust Banks $2.2B
- Wells Fargo $13.7B
The Deadlines. The government has given the banks that do need capital up to six months to raise it – and one month to come up with a plan to do so. June 8, 2009 is the plan deadline and November 9, 2009 is the deadline for raising money.3 Some may raise all the capital they need by converting government debt into private stock.
The Crucial Test. The Fed wanted to check and see if these banks would have at least 6% of their assets in Tier 1 capital and at least 4% in common equity by 2010 under the two economic scenarios posed. Tier 1 capital includes common shares, most types of preferred stock, and TARP funds.4
