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The Zacks Analyst Blog Highlights JPMorgan, Citigroup, Bank of America, Wells Fargo and Fifth Third Bancorp
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For Immediate Release
Chicago, IL – September 12, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: JPMorgan (JPM - Free Report) , Citigroup (C - Free Report) , Bank of America (BAC - Free Report) , Wells Fargo & Co. (WFC - Free Report) and Fifth Third Bancorp (FITB - Free Report) .
Here are highlights from Wednesday’s Analyst Blog:
Fed Unveils Scaled-Back Capital Requirements Plan for Big Banks
The Federal Reserve Board’s vice-chair of supervision, Michael Barr, on Tuesday, outlined proposed Basel regulations which, if approved, would roughly halve the additional capital that big banks would need to maintain to safeguard them in the event of a financial crisis. The new plan requires banks to hold 9% of additional capital instead of 19% proposed in the initial plan.
Barr announced that regulators would resubmit diluted drafts of the global banks' capital regulation and the so-called Basel Endgame rule. This is a significant victory for Wall Street lenders who have been actively pushing for the amendments' weakening.
The modifications above are a part of the global regulatory framework known as the Basel III endgame, which aims to prevent a recurrence of the 2008 financial crisis. The changes relate to the capital surcharge for global systemically important banks (G-SIBs), including JPMorgan, Citigroup, Bank of America and Wells Fargo & Co.
Barr stated that this is an interim step. The Fed, along with the Office of the Comptroller for the Currency and Federal Deposit Insurance Corporation (FDIC), "have not made final decisions on any aspect of the re-proposals.”
Despite the toned-down version of capital regulations being a positive development for banks, it was overshadowed by weaker guidance provided by banks at the Barclays conference. Shares of JPM tanked 5.2%, C dropped 2.7%, WFC fell 1.2% and BAC declined marginally in yesterday’s trading session.
Fed’s Modification in Capital Level of Big Banks
Introduced in July 2023, the regulatory overhaul known as the Basel Endgame would have boosted capital requirements for the world’s largest banks by nearly 19%.
In line with the latest proposal, Barr said that the regulators have revamped the proposal and will resubmit it with a roughly 9% increase in capital requirements for big banks.
FITB & Other Mid-Size Banks Spared from Strict Capital Requirement
G-SIBs aren’t the only banks that would get off easier with the requirements proposed.
The new plan exempts medium-sized banks (with between $100 billion and $250 billion in assets), like Fifth Third Bancorp, Huntington Bancshares and others, initially subject to stricter standards, from increased capital requirements. These banks will still be required to recognize unrealized gains and losses of their securities portfolios in regulatory capital.
Earlier, these mid-sized banks were included to make them resilient and better prepared for shocks like the crisis when massive deposit withdrawals led to the failures of Silicon Valley Bank, Signature Bank and First Republic last year.
For these banks, the impact of the re-proposal would mainly result from the inclusion of unrealized gains and losses on their securities in regulatory capital, estimated to be equivalent to a 3-4% increase in capital requirements over the long run.
The smallest banks would only see their capital requirements increase by 0.5%.
Final Thoughts on Toned-Down Capital Requirements for Banks
The toned-down capital requirements will be beneficial for banks. This amount might be allocated to other initiatives or to increase lending activities.
Barr stated, “This process has led us to conclude that broad and material changes to the proposals are warranted.” He further added, “There are benefits and costs to increasing capital requirements. The changes we intend to make will bring these two important objectives into better balance.”
The plan aims to strengthen supervision over lending and trading and increase safety.
We will have to wait until the new proposal is finalized to see how these affect banks’ financials over time.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights JPMorgan, Citigroup, Bank of America, Wells Fargo and Fifth Third Bancorp
For Immediate Release
Chicago, IL – September 12, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: JPMorgan (JPM - Free Report) , Citigroup (C - Free Report) , Bank of America (BAC - Free Report) , Wells Fargo & Co. (WFC - Free Report) and Fifth Third Bancorp (FITB - Free Report) .
Here are highlights from Wednesday’s Analyst Blog:
Fed Unveils Scaled-Back Capital Requirements Plan for Big Banks
The Federal Reserve Board’s vice-chair of supervision, Michael Barr, on Tuesday, outlined proposed Basel regulations which, if approved, would roughly halve the additional capital that big banks would need to maintain to safeguard them in the event of a financial crisis. The new plan requires banks to hold 9% of additional capital instead of 19% proposed in the initial plan.
Barr announced that regulators would resubmit diluted drafts of the global banks' capital regulation and the so-called Basel Endgame rule. This is a significant victory for Wall Street lenders who have been actively pushing for the amendments' weakening.
The modifications above are a part of the global regulatory framework known as the Basel III endgame, which aims to prevent a recurrence of the 2008 financial crisis. The changes relate to the capital surcharge for global systemically important banks (G-SIBs), including JPMorgan, Citigroup, Bank of America and Wells Fargo & Co.
Barr stated that this is an interim step. The Fed, along with the Office of the Comptroller for the Currency and Federal Deposit Insurance Corporation (FDIC), "have not made final decisions on any aspect of the re-proposals.”
Despite the toned-down version of capital regulations being a positive development for banks, it was overshadowed by weaker guidance provided by banks at the Barclays conference. Shares of JPM tanked 5.2%, C dropped 2.7%, WFC fell 1.2% and BAC declined marginally in yesterday’s trading session.
Fed’s Modification in Capital Level of Big Banks
Introduced in July 2023, the regulatory overhaul known as the Basel Endgame would have boosted capital requirements for the world’s largest banks by nearly 19%.
In line with the latest proposal, Barr said that the regulators have revamped the proposal and will resubmit it with a roughly 9% increase in capital requirements for big banks.
FITB & Other Mid-Size Banks Spared from Strict Capital Requirement
G-SIBs aren’t the only banks that would get off easier with the requirements proposed.
The new plan exempts medium-sized banks (with between $100 billion and $250 billion in assets), like Fifth Third Bancorp, Huntington Bancshares and others, initially subject to stricter standards, from increased capital requirements. These banks will still be required to recognize unrealized gains and losses of their securities portfolios in regulatory capital.
Earlier, these mid-sized banks were included to make them resilient and better prepared for shocks like the crisis when massive deposit withdrawals led to the failures of Silicon Valley Bank, Signature Bank and First Republic last year.
For these banks, the impact of the re-proposal would mainly result from the inclusion of unrealized gains and losses on their securities in regulatory capital, estimated to be equivalent to a 3-4% increase in capital requirements over the long run.
The smallest banks would only see their capital requirements increase by 0.5%.
Final Thoughts on Toned-Down Capital Requirements for Banks
The toned-down capital requirements will be beneficial for banks. This amount might be allocated to other initiatives or to increase lending activities.
Barr stated, “This process has led us to conclude that broad and material changes to the proposals are warranted.” He further added, “There are benefits and costs to increasing capital requirements. The changes we intend to make will bring these two important objectives into better balance.”
The plan aims to strengthen supervision over lending and trading and increase safety.
We will have to wait until the new proposal is finalized to see how these affect banks’ financials over time.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.