FBR Capital Markets own bank stress test results

Discussion in 'Wall St. News' started by ASusilovic, Apr 23, 2009.

  1. NEW YORK (MarketWatch) -- Most of the largest U.S. banks will have enough capital to withstand an unemployment rate of 10%, but their viability without more capital-raising is questionable above that level, according to a "stress test" of several large banks released Wednesday by FBR Capital Markets.

    Several bank executives have said they believe the unemployment rate will peak around 10%, and in the "adverse" scenario - outlined in the U.S. Treasury Department's stress test - unemployment crests at just above that level.

    But FBR Capital analyst Paul Miller, who authored FBR's report on stress tests, believes the banks and government's expectations are overly optimistic. In the firm's survey of 62 buy-side firms, about 80% think the unemployment rate will peak between 10% and 12% and about half expect the peak to come as late as the second or third quarter of 2010.

    The unemployment rate is highly related to banks' loss levels, as people stop paying their debts when they lose their jobs.

    At 12% unemployment, FBR's stress test found that the level of most large banks' tangible common equity - the most conservative measure of banks' capital - falls below 3% of their risk-weighed assets and, in some cases, is exhausted completely. Three percent is seen as a minimum acceptable level of tangible common equity, and the government has indicated they will require banks to maintain that level.

  2. Daal


    Meredith Whitney gets all the hype but this guy is the #1 bank analyst in the US according to forbes

    Whitney kept pumping lehman stock telling the world what a huge bargain it was, also said that Erin Callan was so awesome. This guy said TCE was real capital back in october before anyone realized the problems with TARP1

    And its interesting how the bank officials unemployment prediction just somehow happens to be the ones they can survive on, almost as if it happened by a 'strange coincidence'