Soon after the CCAR results, Bank stocks were moving upwards as most of the stocks of large banks registered a growth of 2 to 3 per cent on an average. After the results were announced, lenders had shifted gears as they announced their plans to hand the shareholders capitals costing a handsome amount. CCAR, the Comprehensive Capital Analysis and Review, is second and final stress test conducted on yearly basis by the Federal Reserve.
Most of the top banks, including the likes of Bank Of America, Goldman Sachs, and JP Morgan Chase, registered growth in early tradings on Friday. The Federal Reserve tested a total of 18 banks and has cleared them all in the CCAR. The sum of payout for all these 18 tested banks is expected to reach a record USD 173 billion. Credit Suisse’s US Division was the only bank that failed to pass the annual review owing to their weak capital planning process. While Bank of America went up by around 3 per cent, Goldman Sachs and JP Morgan Chase surged by 2 per cent each. Deutsche Bank and Wells Fargo were among the surprise names in the list, as Wall Street analysts expected a different outcome for the two big names. Almost all the banks raised their dividends and witnessed an upsurge in their respective stock buybacks.
Fed’s CCAR results might have spurred the struggling banking sector, but a grave dip in the market is expected because of Fed’s upcoming decisions and plans. The Federal rate cut is the talk of the town in stock markets as usually the rate cuts have only helped the stock markets move forward. However, according to a few experts, including John Hussman, the new Federal rate cuts are expected to bring a dip of 65 per cent in the S&P 500.