This week the Federal Reserve and the Federal Deposit Insurance Corporation both said 5 of the nation’s 8 biggest largest banks had not presented “credible” plans for how they would wind themselves down in a crisis.
In other words, in the event of a financial crisis similar to what happened in 2008, the government believes it would have to prop up those banks to avoid chaos. The 5 banks whose plans were rejected by regulators have until Oct. 1 to resubmit.
In the meantime, where do those 5 banks stand? Is there any real danger any or all of them could tumble?
Thomson Reuters said analysts expected a weak first quarter for JPMorgan Chase with profit dropping to $1.26 a share. In fact, the bank reported profit of $1.35 a share, slightly better than expectations.
Despite JPMorgan Chase’s “not as bad as expected” results, the regulatory setback and impending Oct. 1 deadline “introduces a lot of uncertainty” according to Shannon Stemm at Edward Jones in St. Louis.
Bank of America reported this week that Q1 net income fell 13% from a year ago coming in at $2.7 billion versus $3.1 billion last year. Earnings per share were $0.21, which matched the analyst consensus estimate, as polled by S&P Global Market Intelligence.
In a conference call with analysts, BAC CEO Brian Moynihan said cost cuts weren't over for the bank.
On a positive note, loans grew 3% during the quarter to $901.1 billion, much of the increase attributed to a 15% increase in commercial loans.
Wells Fargo & Co.’s Q1 profit fell 5.9% thanks, in part, to the slump in oil prices. The bank said the energy portfolio accounts for just 2% of overall loans, but the losses continue.
Cyrus Cynati of Fortune, however, took a “nothing to see here” approach saying Wells Fargo will weather the oil storm. Cyanti pointed out that it’s been 18 months since the oil collapse and there has still been no meltdown by Wells Fargo or anyone else.
Although CEO Gerald Hassell has been under fire recently, detractors appeared to give him a pass at the company’s annual meeting Tuesday thanks to the bank's improving performance over the past year.
The bank cut costs by 2% and earnings grew by 19% per share. The fact that Bank of New York Mellon is on track to hit three-year targets laid out in 2014, may be driving lessoning of criticism.
Analyst Mike Mayo, who has been critical of Hassel said, “BNY Mellon has made positive progress.”
CNBC’s Jon Najarian was downright “bullish” on the Halftime Report Thursday saying, "Northern Trust, State Street, and Bank of New York Mellon are going to rock."
Speaking of bullish, Morningstar just gave State Street Corp an “A” credit rating saying the company is a low default risk. The credit rating came with a 5-star stock rating.
The positive news from Morningstar may help mitigate the company’s failing grade with the feds as well as recent headlines about former State Street executives charged with defrauding clients through secret commissions which the allegedly applied to billions of dollars in securities trades.
State Street reports earnings Apr. 27 with analysts expecting $0.91 per share on revenue of $2.56 billion.