US banks ‘ace’ Fed stress tests

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In our view, this year’s CCAR[1] process – which all 34 systemically important US banks passed – points the way to a brighter future for the financial services sector.

The results support our belief that the market has been under-appreciating the magnitude of capital return both this year and importantly next year when the new administration chooses their pro-business appointees at the Federal Reserve.

As long-term relative price-to-book ratios in the sector suggest, a whole group of undervalued companies in the sector have good prospects even if only part of the reform package of President Donald Trump gets through.

John Bailer – The Boston Company, a BNY Mellon company

[1] The Comprehensive Capital Analysis and Review (CCAR) is an annual exercise by the Federal Reserve to assess whether the largest bank holding companies operating in the United States have sufficient capital to continue operations throughout times of economic and financial stress

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