2013 Fed Bank Stress Tests Have Only One Failure, Dividends Await

The adverse scenario was a moderate U.S. recession that would have begun in the fourth quarter of 2012 and lasts until early 2014. In this period, real GDP would fall by 2%, unemployment would jump up to 9.75%, CPI would reach 4% by the middle of 2013, and equity prices would fall by 25% by the middle of 2013. The VIX (volatility index) would also rise to more than 40 at the start of the scenario, housing prices would drop more than 6% during 2013, and commercial real estate prices would fall by 4.5% during 2013.

The Federal Reserve said that the nation’s largest banks have continued to improve their ability to withstand an extremely adverse hypothetical economic scenario and are now in a much stronger capital position than before the financial crisis.

The full results are here.

We expect that Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C), SunTrust Banks Inc. (NYSE: STI), U.S. Bancorp (NYSE: USB), KeyCorp (NYSE: KEY), J.P. Morgan Chase & Co. (NYSE: JPM), Bank of New York Mellon Corp. (NYSE: BK) PNC Financial Services Group Inc. (NYSE: PNC) and others will all have sought to request higher dividends and to resume share buybacks.