The oncoming bank buyback

I have talked about how buyback can drive Citi’s share price. All the banks (big, medium) banks are preparing for Basel III endgame. The expectation of a high reserve requirement, and what are considered risky assets, how much capital are required are slowly emerging. The big money center banks have already started adjusting their risky assets exposure to reduce capital requirements. It is anticipated the final regulatory requirement may be lot less than once feared. The below table shows how much excess capital banks are holding vs their regulatory requirement and vs market cap.

When the Basel III Endgame is announced, and stress test are completed, we will know how much buyback capacity each bank will have, and a significant bank buyback may kick in. Lot of these shares have moved up sharply from last year, but buyback is such strong momentum, they can drive another 10% to 20% easily. especially some of the regionals with 20% excess reserve as % of their market cap.

I have not yet fully thought through how to position myself for this. I may need to research further and narrow down 1 or 2 names and will post.