U.S. Bank stocks could be set to firmly undercut a record losing streak as results from a second round of the Federal Reserve's stress test signal, it's time to buy. Analysts from Goldman Sachs and Bank of America say there may now be a catalyst for a relief rally, as the results could "spark a new supply in banks."
Clear winners are Wells Fargo, who was formerly in the Federal Reserve Criminal Division, and who now plans to repurchase shares up to $ 24.5 billion and increase their dividend. Wells Fargo shares rise 6 percent in early trading, most since November 2016. Ally Financial and Santander Consumer USA received an analyst upgrade following the results; Ally rises 4.9 percent and Santander Consumer USA rises 3.7 percent. The KBW bank index rolls 1.8 percent, led by Wells Fargo.
Here is an example of an analyst commentary:
Bank of America, Erika Najarian
"CCAR outcomes could spark new offerings in banks" Banks can increase their dividends by 34 percent and stock worth 80.3 Buy back billions of dollars, compared to $ 60.5 billion last year.
Najarian sees large and regional banks in the expectation that banks will return 114 percent of the gain and 10 percent of the market capitalization The above-market results from a first round of stress testing and a risk-off backdrop meant that " Bank shares were sloppy last week ". It does not believe that the banks using the "Mulligan" – JPMorgan, KeyCorp, M & T Bank, which had to resubmit the initial capital requirements due to DFAST results – are being punished. She identifies Wells Fargo, JP Morgan and Huntington as "the most notable positive surprises".
Goldman, Richard Ramsden
Banks could find a catalyst for an "auxiliary rally" as a second round of the Federal Reserve stress test Results were better than expected and dividends should rise. Goldman sees the largest relative winners, such as Wells Fargo, Huntington, Regions, SunTrust and Fifth Third, and notes that Wells Fargo's $ 24.5 billion repurchase should reduce the number of effective shares by 9 percent
Morgan Stanley, Betsy Graseck
harder CCAR … but a flexible and pragmatic Fed means you should not be surprised if banks submit capital returns again. While this year's CCAR audit was harder for banks, it also showed a Fed seems to be more practical. pragmatic approach to banking regulation. "
Graseck notes that the Fed has allowed three banks to continue their capital plans on conditional non-injections, despite strained capital ratios that have been undercut as a result of one-off adjustments from tax reform or adjustments." Several standard deviation moves in the global shock market Fargo, BofA and Citigroup have the most potential to resubmit plans later in the year, while Northern Trust, Wells Fargo and BB & T may see the biggest gain from the surplus capital repatriation.
RBC, Gerard Cassidy
The Money Centers Citigroup, JPMorgan and Wells Fargo were winners, led by Wells Fargo. "Cassidy also features Bank of America among the winners. "The results from Morgan Stanley and Goldman were less fulfilling, but could have been worse."
KBW, Brian Kleinhanzl
"Gross pay rates were below our expectations, yet payouts rose seven percentage points year-on-year for the median Finally, the Fed weighed more stress than we expected to go into DFAST and it did reflected in the final capital plans that the banks filed. "
Janney, John Rowan
Rowan equips Ally and Santander Consumer USA on neutral, after the Fed had raised no objections to their capital plans, both of which significantly increased the capital distributions in the form of repurchases and dividends. "Remarkably, Ally's stock repurchase plan is 32% higher than last year, and Santander Consumer now has a repurchase plan."
Evercore ISI, Glenn Schorr
"Overall, we would call this CCAR season successful (and better than the DFAST results implied), as the Fed's approved total payment dollars virtually increased, although the payout ratio was due to a combination from higher profits (tax reform), a tougher test, and a handful of companies sank slightly that had some problems. "
" The Regionals were really good (especially Wells Fargo), while the low expectations cards were low. "Brokers Goldman and Morgan Stanley "Were a bit low (but have a Hall Pass)."
Credit Suisse, Susan Roth Katzke
Some big capital banks fared "better, some worse, some in line," with covered banks approved for what means 94% gross and 89% net payouts (versus an estimate of 102% gross and 92% net). "On a dollar basis, the sum of authorized capital returns was only 1% below the forecast."
Bernstein, John McDonald
"Overall, CCAR results for 2018 were solid as the Group posted a strong uptrend in both areas, and repurchases and dividends and gross payoffs approximated consensus estimates, with bank-to-bank performance fluctuating; with some big increases and strokes (Wells Fargo, SunTrust, Regions) and some underperformed / or back to shareholders less than last year (PNC, BB & T, Morgan Stanley). "
Portales, Charles Peabody
19659031] "It is worth noting that JPMorgan would most likely retain its dividend if it re-submitted its new request. This suggests that Jamie Dimon sees less value in share buybacks with currently high book value prices."
The emphasis on dividends could point to a maturing growth cycle in the industry. "
" Wells Fargo, H Untington Bancshares and Ally Financial provided the biggest positive surprises, while Morgan Stanley, PNC and State Street were the biggest disappointments. "
HEC Capital Markets, Ed Groshan's
CCAR results" were very strong, in our view, with some notable exceptions. "JPMorgan Chase, American Express, Keycorp and M & T Bank" appear to have submitted aggressive capital repayment plans that had to be adjusted according to the Federal Reserve model. As expected, the Fed has challenged the Goldman Sachs', Morgan Stanleys and State Street Corporation results.
Compass Point, Isaac Boltansky
"We have had three policy-related measures from the release: (1) this test shows the value of the Mulligan, with more successful Mulligan's than ever during this cycle; (2) this Federal Reserve showed indulgence in one-off tax issues (Goldman, Morgan Stanley) and a counterparty concern (State Street), which we regard as a more generous paradigm than would have been expected under the previous Federal Reserve leadership; and (3) the banking system remains incredibly well capitalized, which will further compound the call for additional tight adjustments to the stress test regime.
Cowen, Jaret Seiberg
"CCAR was tough and the banks had more trouble with it than in recent years. However, the Federal Reserve was not so strict as to punish banks for circumstances outside their control, such as when Congress passed a tax reform.
"This confirms our broader view that the new Federal Reserve team will look for ways to lessen the burden on banks, but they generally support the post-crisis regulatory regime and are more interested in improving common sense than at a complete suspension. "
Susquehanna, Jack Micenko
" Despite the rising payoffs, we remain cautiously optimistic as the current rating is fair and not attractive enough, "said Micenko, commenting on regional banks.
Guggenheim, Jeff Cantwell
American Express "seems to be as aggressive as possible with this year's repurchase request. "Increases target price from $ 106 to $ 106, repeatedly neutral rating.