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Jennifer Lynn
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Jennifer is a proficient investor, executive and manager working with analytics data to drive smart business decisions. Technology, eCommerce, Management, Healthcare, Consulting, Strategy. Passionate for Finance, IT, Emerging & Global. Email: consultbydigital @ gmail.com Twitter:... More
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  • Ally Bank Fails Stress Test 0 comments
    Jun 21, 2013 5:37 AM | about stocks: ALLY

    Ally Financial Inc. is the only bank with failed stress test ratios. Last month, Federal Reserve results were released of 18 of the largest financial institutions which came out "recession proof". The initial phase one of a two phase stress test is to test big banks on their resiliency outcomes such as 2008's Credit Crisis. Ally stated in a recent announcement showing its defiance towards the Federal Reserve's stress test results, "Ally Financial continues to disagree with the Federal Reserve's assumptions and modeled results."

    Ally Bank is still a government owned bank. The big banks stress test showed Ally Bank had a 1.5% in capital which measured against the tests Tier 1 common ratio. The number ratio is well below accepted standard of 5%. According to CNBC, " Ally's inability to pass the test could pose another roadblock to the U.S. Treasury's plan to eventually sell its 73.8 percent stake in the bank. Ally was saved by the government in 2009 with a $17.2 billion dollar bailout."

    17 other banking institutions were also included in the test. There were recession challenges that were discovered such as in the areas of mortgage, securities and loan losses.

    Many other problem areas were identified in Ally Bank's failed stress test. Ally's mulligan Tier 1 common ratio fell to 1.52 percent. With its Tier 1 common ratio, a 1.78 percent ratio was also resulted below the Federal Reserve minimum in reference to lose of equity. Ally is however, allowed to and will re-submit its capital plan. Ally Holdings is also still associated with ResCap. ResCap is in relation to bankruptcy and is the subprime mortgage unit of GMAC Finance (Former name of All.) The government's plans to sell U.S. Treasury to Ally looks even less optimistic.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: ALLY
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