The Fed released the results of their latest, greatest version of a bank stress test yesterday and the biggest surprise was the entertainment value.
The test consisted of projecting 19 financial institutions' ability to withstand a Depression-type scenario of a 21% drop in housing, 50% decline in stocks, and an unemployment rate of 13%. Only those banks showing greater than 5% Tier 1 common capital ratio (High quality capital versus risk weighted assets) were given an unqualified passing grade. Passing marks mean a bank could start giving cash back to shareholders in the form of dividends and share buybacks.
Still with me? Good because this is where it gets fun.
The results of the Fed's third round of stress tests since 2009 were scheduled for release on Thursday after the market close.
However, 56 minutes before of the close of trading yesterday JPMorgan (JPM) announced they had passed the test. Not only that, but the company launched a buyback plan of up to $15 billion of common stock and a 20% hike in their dividend. JPM's release came 2 days and 56 minutes prior to what the Fed had originally planned.Read More »from Fed’s Bank Stress Tests: JPMorgan vs. Citigroup