All banks pass stress test

Stocks A to Z
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All 34 banks passed the Federal Reserve’s stress test, indicating that they would have enough capital to allow them to continue lending to households and businesses during a severe recession, the central bank said Thursday.

2022’s hypothetical scenario included a severe global recession with substantial stress in commercial real estate and corporate debt markets. The unemployment rate rises by 5-3/4 percentage points to a peak of 10% and GDP declines commensurately. Asset prices decline sharply, with a nearly 40% decline in commercial real estate prices and a 55% decline in stock prices.

https://seekingalpha.com/news/3851379-banks-pass-federal-res…

Banks and other Financials stocks were down sharply today on recession fears. Maybe the stress test results will calm nerves tomorrow.

And higher dividends and buybacks from BRK holdings: BAC, AXP, USB, C.

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Citi will not have much capital available to do the usual buybacks. At the current share price, I wish they don’t increase dividend or even better suspend dividend and use the entire proceeds to buyback. For publicly listed companies a revenue decline is kryptonite. But ideal scenario for Citi is to reduce their loan book a bit, which reduces their capital requirement, forego associated profits, but use the released capital to buyback. OTOH, you cannot shrink your way to higher share price and of course there is a reason why I am not running Citi :slight_smile: