Seeking Alpha

Tim Travis'  Instablog

Tim Travis
Send Message
Tim Travis is a veteran deep value investor and money manager. Travis has extensive experience in traditional investments such as stocks and bonds, in addition to having a unique methodology of combining options and distressed investing with value investing to generate income, reduce risk, and... More
My company:
T&T Capital Management
My blog:
T&T Capital Management Blog
My book:
Learn to Treat Your Portfolio as a Business
  • Fed Says 15 Of 19 Banks Have Adequate Capital In Stress Scenario 0 comments
    Mar 14, 2012 11:40 AM | about stocks: C, BAC, JPM, WFC, GS, MS, USB, BK
    Today we had some big news with the Federal Reserve announcing the results of the dramatic stress tests. As a whole the US banking industry did quite well, which is to be expected considering they have double the capital that they had three years ago.

    I was somewhat surprised to see Citigroup, which has one of the highest Tier 1 Capital Ratios of the large banks test. The issue wasn't whether or not Citigroup wold have adequate capital even under the stress conditions, but instead the issue was the amount of capital the company wanted to spend on dividends and share buybacks, in addition to the stress scenario. To resolve the issue it is very likely that the bank will just lower their proposed capital plans to a level that the Fed is more comfortable with.

    JP Morgan came out as the biggest winner of the tests with the announcement that they have been approved for a $15 Billion buyback, and a substantial dividend increase. While Jamie Dimon looks great, Vikram Pandit the CEO of Citigroup doesn't look very good by being too aggressive in their capital plans. Brian Moynihan of Bank of America didn't ask for any share buybacks or dividends and therefore was able to pass the test. This is much more of a short term perception issue that will probably be forgotten in a few months, and I think that any weakness in Citi's stock as a result of this would ultimately be a buying opportunity.

    Wells Fargo, US Bancorp, Bank of New York, Goldman Sachs, Morgan Stanley, all fared quite well. Below is the link to the Bloomberg article outlining the results:

    http://www.bloomberg.com/news/2012-03-13/fed-says-15-of-19-banks-have-adequate-capital-in-stress-scenario.html

    Disclosure: I am long C, BAC, WFC, JPM, MS.

    Stocks: C, BAC, JPM, WFC, GS, MS, USB, BK
Back To Tim Travis' Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.