- New CCAR guidelines are largely inline with last year, says the team at Credit Suisse, but some variables pose more onerous assumptions and could keep capital distributions more conservative than otherwise expected, though still improved from last year.
- The incorporation of a large counterparty default scenario is particularly of note for those banks with material trading and custodial operations. The bar for CCAR passage is thus raised for: BAC, BK, C, GS, JPM, MS, STT, and WFC.
- Additionally, the weakening of economic activity in the severely adverse scenario appears worse than last year. Also included is a reversal in the recent improvement in U.S. housing and the European economy.
- Those best-positioned for excess capital deployment: AXP, HBAN, KEY, NTRS, RF, and USB. Bank of New York, Goldman, State Street, and Wells Fargo all have the honor of ending up on both lists.
- ETFs: KBE, KBWB.
CS: Investors may want to dial back bank capital return hopes
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