All Big US Banks May Need More Aid in Severe Scenario
CreditSights has reissued its forward stress tests with an eye towards which banks may be getting a fresh round of capital following the announcement Tuesday of a revised bank bailout plan by US Treasury Secretary Timothy Geithner.
“We believe that based on our conservative loss stress test, Citigroup (NYSE: C), Bank of America (NYSE: BAC), and Wells Fargo (NYSE: WFC) may require additional capital assistance based on our cumulative loss estimates and capital thresholds. Similarly, in our severe loss scenario, all big banks/brokers – Citi, Bank of America, Wells Fargo, JPMorgan (NYSE: JPM), Goldman Sachs (NYSE: GS), and Morgan Stanley NYSE: MS) – may require capital assistance. We note that our capital assistance projections are driven by our forecast for future credit losses, pre-provision internal capital generation, and a targeted TCE ratio of 4.0%, and a Tier 1 ratio of 8.0%.”
CreditSights has a generally positive assessment of the revised bailout program:
The numerical specifics and extent of programs were kept general and not specific enough in the speech … Still, overall intent seems progressive as it seems the full resources of the US government are being targeted in a more comprehensive and focused fashion on financial stability.
For details of CreditSights’ stress tests and analysis of the program see: Banks: Geithner’s War Plan to KickStart Banking.
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