Thoughts on the 2014 CCAR Results

March 27, 2014 at 2:15 PM

The Federal Reserve Board announced on March 26 that it did not object to the capital plans of 25 of the largest bank holding companies that were submitted as part of the 2014 Comprehensive Capital Analysis and Review process.  This is a clear signal that most of the large banks have sound risk-profiles and are well capitalized.  The legal and regulatory distractions that have hampered many of them since the financial crisis are receding and executive management can now fully focus their attention on growing market share.

Most of the banks that passed the test promptly announced their intention to raise dividends and to undertake repurchases of stock.  In part, this is indicative of the limited opportunities to deploy the capital via organic growth.  Many of these large banks cannot deploy capital by acquiring another bank because of too-big-to-fail concerns among regulators.  Investors in community banks will likely expect the same return of capital that large bank shareholders receive.

Also noteworthy were some of the organizations that failed the CCAR process.   These include RBS Citizens Financial Group, Inc. and Santander Holdings USA, Inc. – both of which are foreign-owned and operate large multistate operations.  CPG will be watching both carefully this year to see if the parent companies will divest their U.S. operations in whole or in-part.

For more information, please contact Claude Hanley.

Eileen Sullivan

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