June 29, 2017 / 4:30 PM / 7 months ago

Fitch: CCAR Results Enables Big Rise in US Bank Capital Payouts

(The following statement was released by the rating agency) NEW YORK/CHICAGO, June 29 (Fitch) The results of the 2017 Comprehensive Capital Adequacy Review (CCAR), alongside the earlier Dodd-Frank Stress Test (DFAST) results, highlight continued capital strength among large U.S. bank holding companies (BHCs) and will enable many of them to significantly increase capital payouts, says Fitch Ratings. Fitch has anticipated increased payout ratios and, therefore, they should not have near-term credit implications. The results, released yesterday, marked the first year that the Federal Reserve (the Fed) did not object to any of the tested banks' capital plans. All banks met the quantitative assessment, and those subject to the qualitative assessment were cleared to proceed with their capital return plans. This will mean a substantial rise in the payout ratio from prior years for some firms. Many have already announced increased dividends and share repurchases in response to their CCAR results. This could reverse the trend of continued capital build for some of these banks. The median increase in the total risk-based capital ratio for the firms that fall under the stress tests between last year's and this year's DFAST was 0.5%. However, Fitch does not expect payouts to increase to a level that would lead to meaningful capital erosion. As with last year's stress test, none of the 34 BHCs tested (up from 33 last year) failed to meet the CCAR quantitative assessment. This was the first year where the qualitative assessment of the CCAR excluded BHCs with less than $250 billion in assets and foreign banking organizations. While the 13 firms subject to the qualitative assessment did not receive capital plan objections, Capital One received a conditional non-objection for qualitative reasons and will have to resubmit its capital plan by the end of the year. The Fed noted that there had been general improvement in the capital planning practices and analyses that were measured under the qualitative assessment process. However, it also noted that there were still weaknesses for some firms, particularly in areas pertaining to controls, loss estimation approaches and identification of risks with new products or changes in underwriting standards. In the case of Capital One, the Fed highlighted several areas pertaining to these weaknesses as the reasons for the conditional non-objection. Both Amex and Capital One changed their capital plans following the release of the DFAST results last week. Overall, the combined DFAST and CCAR results underscore the improvements that have been made by large U.S. BHCs in capital planning processes and building regulatory capital in recent years. This has been a key factor underpinning Fitch's view of the resilience of large U.S. banks. Contact: Joo-Yung Lee Managing Director Financial Institutions + 1 212 908-0560 Fitch Ratings 33 Whitehall Street New York, NY Julie Solar Senior Director Financial Institutions +1 312 368-5472 70 West Madison Street Chicago, IL Justin Patrie, CFA Senior Analyst Fitch Wire +1 646 582-4964 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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