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Bank Stress Test Cheat Sheet: Winners, Losers, And Key Numbers

Richard J. Parsons profile picture
Richard J. Parsons


  • This post analyzes capital activity as recently reported by 25 banks in connection to the 2017 Comprehensive Capital Analysis and Review.
  • Expected return of shareholder capital is compared to current and one-year forward bank valuations.
  • These three banks look like the big losers.
  • These three banks look like the big winners, including this one bank that will surprise many investors.
  • Another five banks also came out as winners.

The following banks are subject of this post: Ally Financial (ALLY), American Express (AXP), Bank of America (BAC), BB&T (BBT), Bank of New York Mellon (BK), Capital One Financial (COF), Citicorp (C), Citizens Financial Group (CFG), Comerica (CMA), Discover Financial (DFS), Fifth Third Bancorp (FITB), Goldman Sachs Group (GS), Huntington Bank (HBAN), JPMorgan Chase (JPM), KeyBank (KEY), Morgan Stanley (MS), M&T (MTB), Northern Trust (NTRS), PNC Financial Services (PNC), Regions Financial (RF), SunTrust Banks (STI), State Street Corporation (STT), US Bank (USB), Well Fargo (WFC), and Zions Bank (ZION).

It should be noted that Goldman Sachs has made no public statement about its plans to return capital, although it did release a statement on June 22 regarding the Stress Test.

It also should be noted that Capital One ran into some apparent problems with its Stress Test exam as it is required to resubmit its capital plan by year-end. This cannot be good.

Chart 1 shows the results of the recently announced CCAR findings for each bank. Banks will return capital to shareholders two ways: share buybacks (repurchases) and dividends. JPMorgan Chase is expected to return $27.5 billion through a combination of newly announced share buybacks and an increase in its dividend. Bank of America, Citicorp, and Wells Fargo all are expected to return in excess of $15 billion each.

Chart 1

Chart 2 compares the Stress Test approved buybacks and dividends to each bank’s market capitalization at close of business July 5, 2017. According to this chart, the average bank is expected to return 7.2% of market capitalization to shareholders in the form of buybacks and dividends over the next year.

Leading the way are Regions Bank, Discover Financial, Citicorp, and Ally. The laggards are Goldman Sachs (as previously explained), Northern Trust, US Bank, and Huntington.

Of course, actual results

This article was written by

Richard J. Parsons profile picture
Richard J. Parsons is a former banker who writes about the banking industry as well as market risk. He is currently working on his third book about banks. His first book, "Broke: America's Banking System" (2013, RMA), describes why the industry is prone to catastrophic cycles that produced 3,000 bank failures in the U.S. between 1985 and 2012. The second book, "Investing in Banks" (2016, RMA) examines why a small group of elite banks of all sizes consistently overperform the industry over time and through the ups and downs of business cycles. The new book will update "Investing in Banks" with data from 2016-2021. Parsons is a frequent contributor to The Risk Management Journal. He teaches the Advanced Operational Risk Management course for the RMA. Prior to writing and speaking about the banking industry, Parsons spent more than 31 years at Bank of America where he was an executive vice president and member of the Management Operating Committee. In his last role he chaired the bank’s Operational and Compliance Risk Committee and the Emerging Risk Committee. Parsons has a BA in history from Ohio Wesleyan University and an MBA from the University of Virginia Darden School of Business.

Analyst’s Disclosure: I am/we are long JPM, CMA, HBAN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

As a former Bank of America executive, while owning no shares in BAC, I continue to have certain financial interests in BAC.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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