Stress Test Results: Markets Know and Show the Strong, Weak Banks

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Includes: AXP, BAC, BBT, BK, C, COF, FITB, GS, JPM, KBE, KEY, MET, MS, PNC, RF, STI, STT, WFC, XLF
by: Donald Johnson

Bank regulators are trying to make the 19 largest banks keep the results of their stress tests secret until the government releases the findings on May 4. The banks were told the results of their notorious stress tests Friday.

But there are no secrets on Wall Street, except where individual investors like me are concerned.

Analysts working for brokers, hedge funds, mutual funds and the banks themselves have figured out the results. One way to get in on the secrets is to look at the charts to see which of the banks' stocks are outperforming their peers. Charts for JPM, C, BAC, WFC, GS, MS, MET, PNC, USB and BK are here. Charts for STI, STT, COF, BBT, RF, AXP, FITB and KEY are here.

The first thing I am looking at is how the stocks performed last week, especially during the last two or three days. Speculation in The Wall Street Journal is that Regions Financial Corp. (NYSE:RF) and Fifth Third Bancorp (NASDAQ:FITB) have the most exposure to weak commercial real estate markets. Therefore, regulators supposedly are most likley to tell RF and FITB that they must raise more capital by selling stock, converting preferred stock to common, seeking more TARP funds or selling out. These charts show that both RF and FITB fell last week. But they both wound up above their 20-day and 50-day moving averages, which is still a bit bullish. Both have declining relative strength charts just below their price charts, which is bearish.

Citigroup (NYSE:C) and Morgan Stanley (NYSE:MS) sank last week, as these charts show (C and MS) and Keycorp's (NYSE:KEY) charts also look pretty bearish. Bank of New York Mellon (NYSE:BK) had a rough week but closed up 3 cents Friday, as these charts show.

Another way to look at these banks is to go to Seeking Alpha, Yahoo, Google or Morningstar's web sites and create a watch portfolio. Look at their financial ratios and how much the stocks have changed during the last day, week and month.

In the last week, FITB was down 23.2%; RF, 23.1%; Key, 22.65%; BAC, 14.2%; C, 12.6%; MS, 12.2%; STI, 11.5% and BK, 10.6%. In the week, BBT was unchanged. JPM was up 0.4%; GS, 0.6%; USB, 2%; MET, 3.7%; PNC, 3.9%; COF, 6.6%; STT, 9% and AXP, 16%. As a group, the stocks were up 0.19% on the week, 23.8% on the month and 5.5% on year to date. They're down an average of 41.5% over the last 12 months. And they're trading at an average of 74% of Morningstar's estimated fair values for the stocks.

GMAC LLC is not publicly traded. Therefore, there is no stock chart for it.

Disclosure: I own US and am short USB May $19 strike covered calls, which expire May 15.

For educational purposes only. Investigate before you speculate. I am not recommending any trades and take no responsibility for how others trade stocks, ETFs, commodities or anything else.