bank stocks and new Fed capital rules rumors

[ERICOPOLY]

I find it strange that only a few months after the Fed let banks hike dividends and buy back shares, the market is thinking they'll be hit with much higher capital rules.

 

The rumors of Fed intent don't match their actions.

[vinod1]

I agree, I just do not get the fuss about the new capital rules. WFC, BAC, C have Tier 1 Common ratios at 8.3%, 8.6% and 10.8%. Even if the risk weighted assets shift a little bit with the new rules, earnings are going straight to Tier 1 common capital in absence of any share buy backs and token dividends. Any increases would be phased in as well so I do not see any big concern about equity dilution which I think Fed would try to avoid as well given that management would slam the brakes on loan growth.

 

Vinod

[JEast]

Maybe it is more of just the new reduced interchange fees that are coming (i.e. reduced bank profits).

 

Good for retailers though.

 

 

Cheers

JEast

[vinod1]

Maybe it is more of just the new reduced interchange fees that are coming (i.e. reduced bank profits).

 

Good for retailers though.

 

 

Cheers

JEast

 

BAC estimated interchange fees to be reduced by about $2 billion annually. This revenue loss would be mitigated partially via other fees so I do not see this as the main issue for the Big banks. My guess is that the market is pricing lower ROE due to potentially higher capital ratios.

 

Vinod

[PlanMaestro]

It looks like Jamie's whining had an effect. However, does it all really matter when some of these companies are priced at 2x-3x PTPP. How bad can it really be?