Magazine article American Banker

Fed Releases Stress Test Results; Citi, Ally, SunTrust Fall Short

Magazine article American Banker

Fed Releases Stress Test Results; Citi, Ally, SunTrust Fall Short

Article excerpt

Byline: Rob Blackwell

WASHINGTON a Moving unexpectedly two days ahead of schedule, the Federal Reserve Board released the results of its annual stress test on Tuesday, with certain large banks emerging as the strongest among their competitors.

Bank of New York Mellon Corp., State Street Corp., and American Express Co. all produced the strongest results when it came to surpassing the 5% minimum of Tier 1 capital they were asked to meet by the Fed in a hypothetical stress scenario, including plans for issuing dividends or share repurchases.

Overall, most firms met those thresholds, with some significant exceptions, including Citigroup Inc. and SunTrust Banks Inc., which just missed the minimum with a low of 4.9% and 4.8%, respectively. Ally Financial Inc. was the weakest of them at 2.5%.

The Fed purposefully did not disclose which quarters the banks' reached these minimums in order to prevent the market from interpreting when a bank might take a capital action.

For their part, Bank of New York, State Street, and American Express reached double-digit minimums of 13%, 12.5% and 10.8% respectively, in that category.

Firms had also been asked to meet a 4% Tier 1 ratio, 8% Total Capital Ratio, and 3% or 4% Tier 1 leverage ratio, depending on whether the company is subject to the market-risk capital charge. Again, those same firms produced similarly strong results those categories.

Firms have had to undergo stress tests before, but this round marks the first time since the financial crisis that the results will be made public a and it is arguably the most severe version of the test, given the harsh variables that banks had to score themselves against. …

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