Pass and Fail: Fed's Stress Test Good Sign for Balance Sheets
Fifteen out of 19 banks won perfect scores in the Fed's stress tests, the results of which were announced on Wednesday. Citi (NYS: C) , SunTrust Banks, MetLife, and Ally Financial all failed on some measures.
Empowered by the Dodd-Frank Act, the Fed said the tests were based on the banks' ability to maintain capital levels above a regulatory minimum in an "extremely adverse" economic scenario, even while continuing to pay dividends and repurchasing stock.
Citi's stock was down 3.4% at closing. The bank had taken the most financial aid during the financial crisis. It announced it will be resubmitting its capital plan to regulators in the coming months. Ally Financial also intends to resubmit its capital plan. Metlife's shares fell 5.83% at closing on Wednesday. SunTrust saw its shares rise 4.56%.
Certainly the onslaught of negative press in the wake of the financial crisis made it prudent for banks to prove they're better prepared. And while some have criticized the Fed's tests criteria, it can be argued that balance sheets are much more secure today than they were four years ago.
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"Some banks are better positioned than others, and you're going to see them start to steal some market share and sort of separate themselves," said William Fitzpatrick, a Milwaukee-based financial-services analyst at Manulife Asset Management. "We're going to see some separation between the winners and the ones that didn't pass" (Via Bloomberg).
So, which banks did pass the stress test? Here's the list of those trading on the U.S. exchanges and how their share price changed on Wednesday. Keep in mind that many of these firms made big announcements regarding dividends and acquisitions after their scores were publicly announced. (Click here to access free, interactive tools to analyze these ideas.)
1. American Express: Provides charge and credit payment card products, and travel-related services worldwide. Market cap of $65.50B. Price changed by 3.5% on Wednesday.
2. Bank of America (NYS: BAC) : Provides banking and financial services to individuals, small- and middle-market businesses, corporations, and governments primarily in the United States and internationally. Market cap of $94.87B. Price changed by 4.12% on Wednesday
3. BB&T: Operates as the financial holding company for Branch Banking and Trust Company that provides banking and trust services to small and mid-size businesses, public agencies, local governments, and individuals in the United States. Market cap of $21.21B. Price changed by 0.07% on Wednesday
4. The Bank of New York Mellon: Provides various products and services worldwide. Market cap of $27.95B. Price changed by -0.34% on Wednesday
5. Capital One Financial: Operates as the bank holding company for the Capital One Bank (USA), National Association and Capital One, National Association, which provide various financial products and services in the United States, Canada, and the United Kingdom. Market cap of $24.04B. Price changed by 2.71% on Wednesday
6. Fifth Third Bancorp : Operates as a diversified financial services holding company in the United States. Market cap of $13.14B. Price changed by 0.85% on Wednesday
7. Goldman Sachs (NYS: GS) : Provides investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide. Market cap of $59.57B. Price changed by -3.35% on Wednesday
8. JPMorgan Chase (NYS: JPM) : Provides various financial services worldwide. Market cap of $166.36B. Price changed by 0.44% on Wednesday
9. KeyCorp: Operates as a holding company for KeyBank National Association that provides various banking services in the United States. Market cap of $8.10B. Price changed by 2.78% on Wednesday.
10. Morgan Stanley (NYS: MS) : Provides various financial products and services to corporations, governments, financial institutions, and individuals worldwide. Market cap of $36.92B. Price changed by -1.74% on Wednesday.
11. PNC Financial Services Group: Operates as a diversified financial services company. Market cap of $32.37B. Price changed by -0.95% on Wednesday.
12. Regions Financial: Operates as the holding company for the Regions Bank that provides a range of commercial, retail, and mortgage banking services in the United States. Market cap of $7.77B. Price changed by 6.75% on Wednesday.
13. State Street: Provides various financial services and products to the institutional investors worldwide. Market cap of $21.89B. Price changed by 2.3% on Wednesday.
14. US Bancorp : Provides various banking and financial services in the United States. Market cap of $60.16B. Price changed by 1.52% on Wednesday. The stock has had a couple of great days, gaining 9.92% over the last week.
15. Wells Fargo: Provides retail, commercial, and corporate banking services primarily in the United States. Market cap of $175.97B. Price changed by 0.12% on Wednesday.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Data sourced from Finviz.
At the time this article was published The Motley Fool owns shares of PNC Financial Services Group, Fifth Third Bancorp, Key, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo. The Fool owns shares of and has created a covered strangle position in Wells Fargo. Motley Fool newsletter services have recommended buying shares of The Goldman Sachs Group. Motley Fool newsletter services have recommended creating a write covered strangle position in American Express. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.