By Saabira Chaudhuri
Bank of America Corp. on Monday released new data projecting,
under a hypothetical economic downturn, it would have the same
capital levels as it projected last year.
Under the results of its midyear stress test, the bank said its
minimum threshold for the measure of financial health--known as a
Tier 1 common ratio--would fall to 8.4%. A year ago, the bank
projected the same ratio.
Under the latest scenario however, the Charlotte, N.C., lender
created a tougher scenario for itself on certain fronts. For
instance, Bank of America's latest severely adverse scenario
features a U.S. economy with house prices declining 25%, up from a
prediction of 21% a year ago. It also includes a 5.9% decline in
Eurozone real GDP, compared with a 5% decline in the year-ago
scenario. Bank of America's year-ago minimum Tier 1 common ratio
also didn't include the $4 billion capital shortfall the bank
disclosed it had found in April of this year.
Separately Monday, Bank of America projected it would log a
$36.4 billion pretax loss on $31.3 billion in pre-provision net
revenue in case of a severely adverse scenario.
Bank of America released the updated figure as part of a
requirement of the Dodd-Frank Act, which calls on large bank
holding companies to conduct their own so-called stress tests to
help gauge their financial strength.
Thirty banks released results under an initial round of
Dodd-Frank stress tests in March and were required to conduct a
midyear version of the tests, the results of which they are
required to release between Sept. 15 and Sept. 30.
The tests are separate from the Federal Reserve's Comprehensive
Capital Analysis and Review, or CCAR, stress tests, the results of
which were also released in March. The CCAR exams help determine
whether large banks will be able to increase capital payouts to
investors in the form of share repurchases and dividends.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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