All banks pass stress test

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.…

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: