Over the last five trading days, optimism rose among investors as the Federal Reserve approved most of the banks’ 2015 Capital Plan after clearance of the stress tests last week. This year, 28 financial institutions out of 31 in the Comprehensive Capital Analysis and Review (CCAR) got the Fed’s approval.
However, the capital plans of U.S. units of Germany-based Deutsche Bank AG (DB - Analyst Report) and Spain’s Banco Santander, S.A. (SAN - Snapshot Report) have been rejected by the Fed based on certain “qualitative†reasons, while Bank of America Corp. (BAC - Analyst Report) received contingent approval as it is required to on submit its revised capital plan by the end of September. This is because the Fed has identified certain loopholes in its capital planning processes.
The approval from the Fed to increase dividend payment and accelerate share buyback program will definitely help banks attract more investments going forward.
Other activities marked the usual legal issues and restructuring activities. Citigroup Inc. (CÂ -Â Analyst Report) continued with its streamlining operations while past business misconducts continue to trouble banks including JPMorgan Chase & Co. (JPMÂ -Â Analyst Report) and The PNC Financial Services Group, Inc. (PNCÂ –Analyst Report).
(Read the last Bank Stock Roundup for Mar 6, 2015)
Recap of the Week’s Most Important Developments:
1. In furtherance of its strategy to shed international operations, Citigroup is eyeing the sale of its Central America retail units to Madrid-based Banco Popular. The deal is expected to be valued at $1.5 billion. The sale price of the units is anticipated to exceed the units’ book value marginally and the buyer would take over certain liabilities.
However, spokesmen from both companies declined to comment. The units at which Citigroup is planning to sell retail operations include Costa Rica, El Salvador, Guatemala, Nicaragua and Panama. (Read more:Â Citi to Vend Latin American Units for $1.5B to Banco Popular)
2. Citigroup has been in a long legal tussle due to the conflicting stance between the U.S. court and the government of Argentina. The Wall Street banking giant failed in its efforts to lift a court ruling that restricts the bank to make payments on bonds, which were issued under Argentine law following the South American country’s default in 2001. Notably, a payment of a $3.7 million is due on Mar 31.
