Stress Test Preview - JPMorgan vs Citigroup

Friday, 24 Apr 2009
David Faber: Stress Test Preview - JPMorgan vs Citigroup

Posted By:CNBC.com
Topics:Nasdaq NYSE Stock Market Stock Options Stock Picks

The banking industry will learn preliminary results of the so-called stress tests today (Friday) — but CNBC's David Faber reports that plenty of questions will remain. (UPDATED: See below.)

"The banks are going to march down there [the NY Fed], and each CFO will be told, 'you've got an A, a B or a C.' But then the next stage, the real questions have to start to be answered," Faber said.

"For instance, how much capital will need to be raised?" Analyst speculation ranges "as high as 7 percent, as low as 3 percent."

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And of course, the speculation differs from company to company:

"If you're JPMorgan, you may not need to raise any capital. If you're Goldman Sachs, you may not need to. But if you're Citi, it may be a different story."

And once the numbers are derived, Faber said, "the big question remains: How are you going to do it?"

The stress test methodology will be revealed at approximately 2pm ET.

UPDATE: The Federal Reserve said "most banks" are currently well capitalized but need to hold a "substantial" amount above regulatory requirements in case the recession worsens. “Most banks currently have capital levels well in excess of the amounts needed to be well capitalized," the Fed said in its eagerly awaited report.

See Full CNBC Report
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Top TARP Recipients:

JPMorgan Chase
[JPM 32.78 -0.60 (-1.8%) ]

Morgan Stanley
[MS 21.26 -0.70 (-3.19%) ]

Citigroup
[C 3.07 -0.12 (-3.76%) ]

Wells Fargo
[WFC 20.299 -1.101 (-5.14%) ]

Bank of America
[BAC 8.92 -0.18 (-1.98%) ]

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