The Zacks Analyst Blog Highlights: JPMorgan Chase, Bank of America, Morgan Stanley, Citigroup and Goldman Sachs Group
CHICAGO, Oct. 11, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corporation (NYSE: BAC), Morgan Stanley (NYSE: MS), Citigroup, Inc. (NYSE: C) and The Goldman Sachs Group, Inc. (NYSE: GS).
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513
Here are highlights from Wednesday's Analyst Blog:
Bank Stress Test Process Expands
Bank regulating authorities have finally approved the new stress test rules under the purview of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 for assessing the capacities of banks to withstand severe financial crisis. These rules are an expansion of the stress test developed by the Federal Reserve following the 2008 recession. The new rules are applicable for banks with consolidated assets of more than $10 billion.
The new set of rules was jointly approved by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board and the Office of the Comptroller of the Currency (OCC).
The New Rule
The final rule, which implements section 165(i)(2)(A) of the Dodd-Frank Act, requires all financial institutions with assets more than $10 billion and regulated by a primary regulatory authority to carry out an annual company-run stress test. The regulation requires stress tests based on three scenarios – a baseline scenario, an adverse scenario and a severely adverse scenario.
Initially, regulators were of the idea that banks should publicly announce all the results under these three scenarios. However, banks were unwilling to declare results of the baseline and adverse scenario since a conventional earnings forecast backed it, which had high chances of being misconstrued. Therefore, both banks and regulators have agreed to declare only the results of the severely adverse scenario forecasting a profound economic depression.
The rule states that institutions with assets of more than $50 billion – such as JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corporation (NYSE: BAC), Morgan Stanley (NYSE: MS), Citigroup, Inc. (NYSE: C) and The Goldman Sachs Group, Inc. (NYSE: GS) – will initiate stress test in November 2012, using data as of September 30, 2012 and declare the results by January 2013.
However, flexibility has been provided regarding a delay in implementation only if certain cases demand so. The rule delays the execution for covered institutions (mid-size banks) with total consolidated assets between $10 billion and $50 billion until October 2013.
Relief for Mid-Size Banks
Finally, mid-size banking institutions can breathe a sigh of relief as the banking regulators have delayed the implementation of the stress test. These regulators have planned to withhold the final rule making and immediate execution of the proposed rules till October 2013. These banks would have to start with the stress test immediately if the final rules related to it were announced.
One of the main pre-conditions for implementation of the rule is that these companies should have a strong and efficient system in place to conduct the stress test. However, many concerns were put forward regarding the resources and the ability of the companies to conduct the tests in the short span between the declaration of the final rule and onset of the stress test procedure. Hence, the delay till October 2013 will give the companies sufficient time to put the required system in place for conducting the test.
Approximately 108 mid size banks and financial institutions will go through the stress test in October 2013.
New Rule About Deposit Insurance Assessment System
The FDIC also approved a final rule pertaining to the deposit insurance assessment system for insured depository institutions with assets greater than $10 billion. The final rule brings forth necessary changes in the definitions used to identify the concentrations in higher-risk assets to reflect the risk posed to institutions and the FDIC in a better way.
The FDIC also updated its loss, income, and reserve ratio expectations for the Deposit Insurance Fund (DIF) over the next several years and inferred that the DIF reserve ratio is on its way to reach the statutory minimum target of 1.35% by the end of September 30, 2020.
Conducting stress test is an efficient step taken by the regulators to evaluate the overall performance of the banking industry. These tests would enable banks to build up sound capital position to absorb any financial distress. In addition, this could ultimately translate into less involvement of the taxpayers' money for the bailout of troubled financial institutions.
Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
SOURCE Zacks Investment Research, Inc.