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All major US banks pass Fed 'stress tests' -- except for Zions Bancorp


By ALEX VEIGA and MARCY GORDON

WASHINGTON (AP) - More than five years after the financial crisis struck, the biggest U.S. banks are better able to withstand a severe recession than at any time since the meltdown, the Federal Reserve has determined.

Results of the Fed's annual "stress tests" showed Thursday that all but one of 30 top banks passed muster with sufficient capital buffers to keep them lending through an economic crisis. Only Zions Bancorp fell short. The results showed continued improvement in banks' financial positions since the 2008 crisis, the Fed said. That built on positive results from last year's tests.

"The industry is stronger and more profitable than a year ago," said RBC Capital Markets banking analyst Gerard Cassidy.

The banks' stronger positions should enable them to pursue business plans, pay dividends to shareholders, raise capital from investors and expand services to customers, said Frank Keating, president of the American Bankers Association.

The 30 banks tested included Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo and Co.

The Fed has conducted stress tests of the largest U.S. banks every year since 2009, when the financial crisis plunged the country into the worst economic downturn since the Great Depression of the 1930s. The annual checkup is designed to measure how well the industry would fare in another severe recession. It aims to ensure that banks could keep lending during such a punishing stretch.

Under the Fed's stress tests' "severely adverse" scenario, the U.S. would undergo a recession in which unemployment - now at 6.7 percent - would reach 11.25 percent, stocks would lose nearly half their value and home prices would plunge 25 percent.

Under the test, the losses projected for each bank are compared with the capital each holds as a buffer.

The Fed said that under the crisis scenario, the 30 banks would suffer combined losses on loans of $366 billion through the fourth quarter of 2015. That's down from projected losses of $462 billion in last year's tests - even with a much larger number of banks. Fed officials said the change reflected the banks' progress in shedding delinquent and defaulted loans from their balance sheets.

The 30 banks were also tested on how well they would withstand severe downturns in Europe and in Asian countries like China and Japan.

The Fed will announce next week whether it will approve plans by some of the banks to increase dividends or buy their own stock.

Nearly all U.S. banks with $50 billion or more in assets were in the group of 30 that were tested. Together they account for some $13.5 trillion in assets - about 80 percent of U.S. banks' total amount. Twelve of the 30 banks were added to the testing roster for the first time this year.

Most of the 30 banks tested, along with hundreds of others, received federal bailouts during the financial crisis. The banking industry has been recovering steadily since then, with overall profits rising and banks starting to lend more freely. The banks have mostly repaid the taxpayer bailouts.

Zions, the only bank to fall short this year, is based in Salt Lake City. It slid to a loss in the fourth quarter as it booked hefty charges related to losses on investment securities and other one-time items.

Zions said in a statement that its performance on the stress tests was worse than it expected mostly due to significantly higher commercial real estate losses, significantly greater risk-weighted assets and lower pre-tax, pre-provision net revenue. The bank said that it will resubmit its capital plan to the Federal Reserve.

Last year, government-owned Ally Financial Inc. was the only bank that failed. In this round, Ally passed.

Ally said it was pleased that the test results "recognized the substantial transformation that the company has undergone since last year."

The Fed concluded last March that Wall Street powerhouses JPMorgan Chase & Co. and Goldman Sachs Group Inc. needed better plans for coping with a severe downturn and gave the banks until September to revise them. The two banks were allowed to increase their dividends and buy back their stock on condition they submitted revised capital plans that satisfied the Fed.

At the same time, the Fed approved requests outright from 14 of the 18 banks tested, including Bank of America, Citigroup, Morgan Stanley and Wells Fargo.

But the Fed forbade Ally and BB&T Corp. from making any dividend increases and share buybacks they may have been seeking.

Next Wednesday, the Fed will announce whether it has approved each bank's request, if one has been made, to raise dividends for shareholders. Its decisions will be based on how each bank would fare in a severe recession if it increased its payout.

Raising dividends costs money. The government doesn't want banks to deplete their capital reserves, making them vulnerable in another recession.

The other banks tested were: American Express Co., Bank of New York Mellon Corp., BBVA Compass Bancshares Inc., BMO Financial Corp., Capital One Financial Corp., Comerica Inc., Discover Financial Services, Fifth Third Bancorp, HSBC North America Holdings Inc., Huntington Bancshares Inc., KeyCorp, M&T Bank Corp., Northern Trust Corp., PNC Financial Services Group Inc., RBS Citizens Financial Group Inc., Regions Financial Corp., Santander Holdings USA Inc., State Street Corp., U.S. Bancorp and UnionBanCal Corp.

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julietjdx3 March 21 2014 at 4:55 PM

They will pass it because they are crooks they have all your money

Flag Reply +4 rate up
TONY March 21 2014 at 5:22 PM

Sure they are stable , it is because they kept every penny of the bail out money intended for people to keep their mortgages back in 2009 during the bail out. Billions of dollars that was intended to help families all ended up in their hands instead of where it was intended for .

Flag Reply +8 rate up
1 reply
Hello TONY March 21 2014 at 7:51 PM

right on Tony they all are lacking

Flag Reply 0 rate up
TONY March 21 2014 at 5:24 PM

Bank of America also sold 15 banks to Arvest bank to cut cost they are saying .

Flag Reply +1 rate up
dearthaircroi March 21 2014 at 5:25 PM

I would hope so after pouring over 4 trillion dollars into them to cover their toxic investments.

Flag Reply +5 rate up
Feliz Navidaddy March 21 2014 at 5:42 PM

Wells Fargo owes swindled money to 3k homeowners by overcharging rates per DOJ.

Flag Reply +1 rate up
Pantino4 March 22 2014 at 6:11 AM

Bank of America, Fernandina Beach, Fla 32034, the worse bank I ever did business with. On local national or international level. The most poorly miss managed . We have great bank here with two branch offices. Will not now mention their name. BOA isn't worthy to be mentioned on same post. Or mentioned at all.

Flag Reply +3 rate up
laptop603 March 21 2014 at 6:01 PM

Whining about banks. Good grief, if you don't like them, don't use them. The biggest failure for banks are people who get home loans, and then default on them. If you can't pay, don't go asking for money.

Flag Reply +1 rate up
1 reply
Hello laptop603 March 21 2014 at 7:49 PM

right on

Flag Reply 0 rate up
mseeney328 March 21 2014 at 6:33 PM

What about Morgan Stanleys insider trading just 2 days ago?

Flag Reply +1 rate up
1 reply
tortugatommie mseeney328 March 21 2014 at 8:32 PM

They are part owners of the Oval Office.

Flag Reply +1 rate up
kubi490 March 22 2014 at 2:26 AM

and if you believe this load of bs you are definitely washington duped which is where they like the American public

more bs from almighty washington

Flag Reply +3 rate up
lylenpat March 21 2014 at 8:03 PM

Good, Great, Wonderful, NOW MAYBE YOU COULD LOWER YOUR 20 to 30 % interest rates and help us poor middle class get our debts in order. Talk about Gueto and the boys who charge 75 to 100 % interest and collect with bones work.

Flag Reply +1 rate up
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