US banks suffer steeper losses, but retain large cushions in annual Fed health check
Adds analyst comment in paragraph 5, industry statement in paragraph 12, additional details in paragraphs 13-18
By Pete Schroeder and Nupur Anand
WASHINGTON, June 26 (Reuters) -The biggest U.S.banks would have enough capital to withstand severe economic and market turmoil, the Federal Reserve's annual "stress test" exercise showed on Wednesday, but firms faced steeper hypothetical losses this year due to riskier portfolios.
The exercise found 31 big banks would weather a spike in the jobless rate, severe market volatility, and dives in the residential and commercial mortgage markets and still retain enough capital to continue lending.
Specifically, the Fed found levels of high-quality capital at the banks would dip to 9.9% at their lowest levels, which is more than twice the regulatory minimum.
The relatively clean bill of health clears the way for the banks to announce capital plans to shareholders in the coming days, including stock buybacks and dividends. Banks can announce capital plans after the market closes on Friday, a senior Fed official said.
"We are positively surprised with the results as we expected losses to be slightly higher compared to the last few years, especially in areas such as commercial real estate," said Chris Marinac, director of research at financial adviser Janney Montgomery Scott. "This shows that the banks are in good health."
However, the test did find banks suffered steeper losses this year. The 2024 version of the stress test was broadly similar to last year's, and the Fed said the higherlosses were due to how bank portfolios have shifted.
The banks that weretested would suffer a combined $685 billion in losses under ahypothetical severe scenario. On average, banks saw their capital ratios fall by 2.8 percentage points, the steepest decline since 2018.
Of the banks tested, Charles Schwab Corp reported the highest capital levels under the test, posting a 25.2% capital ratio under that severe scenario. Bank of New York Mellon Corp, JPMorgan Chase, Morgan Stanley, Northern Trust and State Street all reported double-digit capital ratios after the test, as did the US operations of Deutsche Bank and UBS.
By comparison, some smaller regional lenders saw their capital levels skirt closer to the minimums, with BMO, Citizens Financial Group, and HSBC all reporting stressed capital ratios below 7%.
The largest global banks all posted capital ratios well above minimums, with JPMorgan posting the highest at 12.5%, and Wells Fargo the lowest at 8.1%. Bank of America posted a 9.1% capital ratio, and Citigroup posted a 9.7% ratio.
The banking industry hailed the latest results as proof that banks are solid, and criticized efforts by the Fed and other regulators to boost big bank capital requirements.
"The continued strength and resilience of the banking sector is further evidence that the recent tsunami of new regulation, including proposed higher capital standards, is unwarranted," said Rob Nichols, CEO of the American Bankers Association, in a statement.
STEEPER LOSSES
The Fed singled out credit cards as a particular source of losses for banks, accounting for over a quarter of hypothetical losses. The Fed noted that large bank credit card balances have grown by over $100 billion in the last year, and delinquency rates have risen by over 40%.
The tested banks overall saw losses of 17.6% to existing loan balances on credit cards, but Ally Financial experienced losses of 40.6% in the test on its relatively small credit card portfolio. Capital One, one of the nation's largest credit card banks, experienced losses of 23.2%, and Goldman Sachs recorded 25.4% in losses.
The Fed also said that banks' corporate credit portfolios have shifted towards riskier loans, and they now hold a larger share of non-investment grade corporate credit, with these loans more than three times more likely to default than investment grade ones.
In the 2024 stress test, banks were projected to lose $142 billion on commercial and industrial (C&I) loans, representing 21% of total projected losses. C&I loans are made to businesses and can include working capital advances, term loans and loans to individuals for business purposes.
Discover Financial, which Capital One hopes to buy pending regulatory approval, posted the steepest commercial and industrial loan losses at 21.8%.
The Fed also flagged that non-interest income at banks from items like investment fees have declined significantly in recent years, while non-interest expenses like compensation and real estate costs have not.
While banks were expected to perform well under this year's exam as they have in years prior, the annual results are significant for each firm because how well they perform dictates how much capital they must hold against potential losses. Excess funds beyondthose capital levels can then be returned to shareholders.
Reporting by Pete Schroeder, editing by Deepa Babington
متعلقہ اثاثے
تازہ ترين خبريں
دستبرداری: XM Group کے ادارے ہماری آن لائن تجارت کی سہولت تک صرف عملدرآمد کی خدمت اور رسائی مہیا کرتے ہیں، کسی شخص کو ویب سائٹ پر یا اس کے ذریعے دستیاب کانٹینٹ کو دیکھنے اور/یا استعمال کرنے کی اجازت دیتا ہے، اس پر تبدیل یا توسیع کا ارادہ نہیں ہے ، اور نہ ہی یہ تبدیل ہوتا ہے یا اس پر وسعت کریں۔ اس طرح کی رسائی اور استعمال ہمیشہ مشروط ہوتا ہے: (i) شرائط و ضوابط؛ (ii) خطرہ انتباہات؛ اور (iii) مکمل دستبرداری۔ لہذا اس طرح کے مواد کو عام معلومات سے زیادہ کے طور پر فراہم کیا جاتا ہے۔ خاص طور پر، براہ کرم آگاہ رہیں کہ ہماری آن لائن تجارت کی سہولت کے مندرجات نہ تو کوئی درخواست ہے، اور نہ ہی فنانشل مارکیٹ میں کوئی لین دین داخل کرنے کی پیش کش ہے۔ کسی بھی فنانشل مارکیٹ میں تجارت میں آپ کے سرمائے کے لئے ایک خاص سطح کا خطرہ ہوتا ہے۔
ہماری آن لائن تجارتی سہولت پر شائع ہونے والے تمام مٹیریل کا مقصد صرف تعلیمی/معلوماتی مقاصد کے لئے ہے، اور اس میں شامل نہیں ہے — اور نہ ہی اسے فنانشل، سرمایہ کاری ٹیکس یا تجارتی مشورے اور سفارشات؛ یا ہماری تجارتی قیمتوں کا ریکارڈ؛ یا کسی بھی فنانشل انسٹرومنٹ میں لین دین کی پیشکش؛ یا اسکے لئے مانگ؛ یا غیر متنازعہ مالی تشہیرات پر مشتمل سمجھا جانا چاہئے۔
کوئی تھرڈ پارٹی کانٹینٹ، نیز XM کے ذریعہ تیار کردہ کانٹینٹ، جیسے: راۓ، خبریں، تحقیق، تجزیہ، قیمتیں اور دیگر معلومات یا اس ویب سائٹ پر مشتمل تھرڈ پارٹی کے سائٹس کے لنکس کو "جیسے ہے" کی بنیاد پر فراہم کیا جاتا ہے، عام مارکیٹ کی تفسیر کے طور پر، اور سرمایہ کاری کے مشورے کو تشکیل نہ دیں۔ اس حد تک کہ کسی بھی کانٹینٹ کو سرمایہ کاری کی تحقیقات کے طور پر سمجھا جاتا ہے، آپ کو نوٹ کرنا اور قبول کرنا ہوگا کہ یہ کانٹینٹ سرمایہ کاری کی تحقیق کی آزادی کو فروغ دینے کے لئے ڈیزائن کردہ قانونی تقاضوں کے مطابق نہیں ہے اور تیار نہیں کیا گیا ہے، اسی طرح، اس پر غور کیا جائے گا بطور متعلقہ قوانین اور ضوابط کے تحت مارکیٹنگ مواصلات۔ براہ کرم یقینی بنائیں کہ آپ غیر آزاد سرمایہ کاری سے متعلق ہماری اطلاع کو پڑھ اور سمجھ چکے ہیں۔ مذکورہ بالا معلومات کے بارے میں تحقیق اور رسک وارننگ ، جس تک رسائی یہاں حاصل کی جا سکتی ہے۔
