Banks Aced Their Big Test This Week

Bank of America, Citigroup, Wells Fargo, JPMorgan Chase -- along with many of their peers -- passed the Fed's Dodd-Frank stress tests. Next up: the CCAR, with its yays or nays to dividend and share buyback requests.

Mar 21, 2014 at 2:00PM

Pass, pass, pass! That was the happy result for nearly every financial institution that underwent the Federal Reserve's Dodd-Frank stress tests, the key results of which were released yesterday.  Essentially, the tests are a series of measurements gauging how the selected companies would perform financially under a set of increasingly dire economic circumstances.

If the results are any indication, they'd do just fine. Of the 30 institutions in the Fed's examination room (up from 18 last year), only a single one -- Utah-based regional lender Zions Bancorporation (NASDAQ:ZION) -- would lack the capital to survive the Fed's worst-case economic scenario.

This, of course, provides hope that the more high-profile financials on the market will have scope to raise their dividends and/or share buyback programs. This will be determined when the Comprehensive Capital Analysis and Review (yeah, try saying that ten times fast) is released next Wednesday afternoon by the Fed. This is the second and perhaps more critical part of the tests, as it will include the Fed's approvals (or lack thereof) to the banks' capital distribution plans.

Two lenders busy biting their nails and pacing the room in anticipation are Bank of America (NYSE:BAC) and Citigroup (NYSE:C). Investors in the two incumbents are starving for an increase in their quarterly dividends, which have stood at $0.01 per share for both firms for longer than anyone cares to remember. The chances are higher for Bank of America to get the nod for such increases, as it had an excellent year in 2013 and continues to thrive. Citigroup is doing better than it has in some time, but still has some fat to shed before it can return to meaningful growth and profitability.

Wells Fargo (NYSE:WFC) is in the Bank of America club of 2013 overachievers. Although it's been struggling with a slowdown in the mortgage market of late, it's still very far in the black in terms of bottom line and the market remains quite bullish on its prospects.  The company has admitted that it is seeking hikes in both its dividend and its share repurchase program; at this point, it'd be surprising if the Fed said no to either.

JPMorgan Chase (NYSE:JPM), for one, will have a few more coins to hand out in dividends or buybacks (assuming, of course, that it's requested a lift in either and the Fed turns on the green light). The bank finally sold its physical commodities trading unit, nearly a year after announcing it was "pursuing strategic alternatives" for the division. The buyer is Switzerland-based Mercuria Energy Group, and the price is $3.5 billion.

This weekend will be a long one for the banks. CCAR Wednesday can't come fast enough. When it does, though, expect at least a few lenders to pop open the Champagne and get good and drunk; at least a few of them should have something to celebrate.

Passing the test with flying colors
Do you hate your bank? If you're like most Americans, chances are good that you answered yes to that question. While that's not great news for consumers, it certainly creates opportunity for savvy investors. That's because there's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banking model. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. For the name and details on this company, click here to access our new special free report.

Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends Bank of America and Wells Fargo, and owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers