Fed annual stress test result: ‘you’re safer in largest global banks’

June 29, 2023 07:43 AM PDT | By Invezz

Fed annual stress test result: ‘you’re safer in largest global banks’ — Image source: Invezz

Pro reacts to Fed’s annual stress test results

Its annual stress test evaluated 23 of the U.S. banks for a hypothetical global recession with a 40% hit to commercial real estate, a sharp increase in unemployment to 10% and a 38% decline in housing prices.

All of them, the central bank revealed, passed the annual exam.

In its press release, the Fed said these banks will maintain minimum capital levels and continue to lend to both consumers and businesses despite projected losses worth a whopping $541 billion. According to Stephen Biggar of Argus Research:

This is a stepping stone on other requirements, [including] Basel III Endgame requirements likely to move capital ratios up and more severe adverse scenarios next year. So, still a tough road ahead for many of these banks.

Are U.S. bank stocks worth owning here?

Banks are facing increased scrutiny after notable names like Silicon Valley Bank, Signature Bank, and the First Republic Bank collapsed earlier in 2023.

It is noteworthy, though, that smaller banks do not go through the Fed’s yearly stress test. On CNBC’s “Worldwide Exchange”, Stephen Biggar added:

I think you’re safer in the largest global banks here, the JPMorgan, Bank of America, Morgan Stanley. They’re much safer from the capital cushion perspective. Valuations are quite compelling.

He also sounded bullish on the super regionals, including PNC Financial, U.S. Bancorp, and Truist Financial. “XLF” – the Financial Select Sector SPDR Fund is currently down about 3.0% for the year.

The post Fed annual stress test result: ‘you’re safer in largest global banks’ appeared first on Invezz.

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