Key & PNC & Fifth Third pass regulators' stress tests -- 4 US banks do not
Wednesday, March 14, 2012
Key, PNC and Fifth Third pass regulators' stress tests; 4
US banks do not
By: Teresa Dixon Murray, The Plain Dealer The Plain Dealer
Fifteen of the nation's 19 largest banks passed federal regulators'
so-called stress tests, including KeyCorp, Fifth Third and PNC, the
Federal Reserve said Tuesday.
The results means that regulators believe these banks could
survive even under a doomsday scenario, including 13 percent
unemployment, a 50 percent decline in the stock market and a 20
percent drop in home prices.
The results of the latest round of stress tests - which started
after the 2008 economic collapse - immediately gave some banks the
green light to raise dividends paid to investors and to buy back
stock, which is also good for investors.
Four banks didn't fare well under the hypothetical crisis
scenario. They are Citigroup, the nation's third-largest bank, and
SunTrust, Ally and MetLife.
Many of the other 15 banks were basking in the good news
within minutes of announcement, just after the stock market closed
Tuesday.
KeyCorp immediately said that its board of directors authorized
a stock repurchase program of up to $344 million. The bank also
wants to increase the quarterly payment to investors from 3 cents
per share to 5 cents in May.
"We are pleased that we received a 'no objection' . . . to our
capital plan from the Federal Reserve today," Beth Mooney, Key's
chairman and chief executive officer, said in a statement. "It
allows us to increase our dividends and to start the process of
returning capital to our shareholders." Mooney noted that Key
remains one of the strongest banks of its size.
With the stock repurchase, Key plans to buy its common stock
through the open market or in privately negotiated transactions by
March 31. The shares will be held as treasury shares and may be
reissued for various corporate purposes, Key said.
PNC also plans to raise its dividend and do a "modest" share
repurchase program, the bank said. The amount of the dividend
increase, which PNC's board expects to approve April 5, wasn't
disclosed. PNC's dividend is currently 35 cents per share.
Other banks, including JPMorgan Chase and U.S. Bank, also
announced dividend increases.
Under the stress tests, the banks had to submit plans to the
Federal Reserve about how they planned to manage their finances
over the next two years. The Federal Reserve then projected losses,
revenues, expenses and capital ratios for each if another economic
crisis occurred.
The stress tests, which give regulators considerably more power
over the banks, is designed to prevent a recurrence of the
nightmare of September 2008. That's when Lehman Brothers, a
humongous investment bank with worldwide influence, collapsed and
threatened to take the entire financial system down with it.