CHICAGO, Dec. 18, 2013 /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 theWells Fargo & Company (NYSE:WFC-Free Report), JPMorgan Chase & Co. (NYSE:JPM-Free Report), Bank of America Corporation (NYSE:BAC-Free Report), Citigroup Inc. (NYSE:C-Free Report) and The Goldman Sachs Group, Inc. (NYSE:GS-Free Report).
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Tuesday's Analyst Blog:
New Obstacle for U.S. Banks' Stress Test
With few months to go before the announcement of annual Comprehensive Capital Analysis and Review (CCAR) results for 2014, U.S. banks now have a new obstacle. On Monday, the Federal Reserve announced the independent projection of bank holding companies' balance sheets and risk-weighted assets under the supervisory scenarios by the agency itself. However, previous annual reviews were based on the projections provided by each individual bank.
These balance sheet projections are used for computation of pro-forma regulatory capital ratios under different scenarios. According to the Fed, independent balance sheet projections provide reliable horizontal analysis of banks. Moreover, it enhances the comparison of results across all bank holding companies and sustains the integrity of results as well.
After clearing stress tests, the banks have the privilege to increase dividends and buy back shares. It is intimated to these banks that payment of higher dividends will be restricted if they fail to meet the requirement of 5% ratio of core capital to risk-weighted assets, among other criteria.
For calculation of capital ratios, a measure of shareholder equity is divided by risk-weighted assets. Therefore, with an increase in asset balances (all other components being equal) banks would be required to hold more capital to keep ratios constant.
Currently authorized under the Dodd-Frank financial services law, the stress tests were first introduced after the 2008 financial crisis. During this economic downturn, major financial institutions like Lehman Brothers collapsed and several other big banks were on the brink of failure. Such a situation compelled the U.S. government to infuse billions of dollars into credit markets and save the financial system.
The Fed's latest stress test scenario projections include input data supplied by the 18 banks participating in DFAST 2013 and models created by the regulatory staff and evaluated by a group of Fed economists and analysts. These models were developed taking into consideration the impact of macroeconomic and financial market factors, which were included in the Supervisory Stress Scenario. The banks' loans and securities portfolios, trading as well as other causes affecting losses, revenues and expenses were taken into count as well.
Further, as per the Dodd-Frank Act, bank holding companies participating in the Fed's stress test rules have to conduct two company-run stress tests each year. Moreover, they have to publicly unveil a summary of the results of the company-run stress tests conducted under the strictly adverse scenario given by the Fed.
Therefore, in September, several U.S. banking majors released their mid-year stress test results as required. The results reflected stability in the banking sector to a great extent. Also, these reaffirmed the ability of U.S. banking giants to survive another economic meltdown.
Notably, the mid-year stress test is different from the annual CCAR process conducted by the Federal Reserve. This mid-cycle stress test was performed under a hypothetical severely adverse economic scenario assumed by the individual banks.
Wells Fargo & Company (NYSE:WFC-Free Report), JPMorgan Chase & Co. (NYSE:JPM-Free Report), Bank of America Corporation (NYSE:BAC-Free Report), Citigroup Inc. (NYSE:C-Free Report) and The Goldman Sachs Group, Inc. (NYSE:GS-Free Report) were among the major banks that released results, which stated that minimum capital levels would remain well above regulatory requirements during the nine-month horizon (from second-quarter 2013 through second-quarter 2015) of high unemployment, declining home prices and stock-market uncertainty.
U.S. banks are showing signs of improvement despite being compelled to meet strict regulatory standards. Though it is too early to be confident of the sector's growth prospects, the progress seen in the first nine months of 2013 indicates a brighter future for banks that are less dependent on risky activities and resort to other profit-making ways.
Improved economic data such as higher consumer spending and GDP, a rebounding housing market and declining unemployment rate raise our hopes. However, the still low-rate environment remains a challenge going forward.
It is impressive to see that U.S. banks are taking legal and regulatory pressure in their stride, indicating their ability to overcome future challenges. However, with the economy still looking to gain traction, we do not expect the sector to return to its pre-recession peak any time soon.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; 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.
Get the full Report on WFC - FREE
Get the full Report on JPM - FREE
Get the full Report on BAC - FREE
Get the full Report on C - FREE
Get the full Report on GS - FREE
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
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
SOURCE Zacks Investment Research, Inc.
WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?
Newsrooms &
Influencers
Digital Media
Outlets
Journalists
Opted In
Share this article