Bank analysts to face real and imagined stress on Thursday
By David Henry
NEW YORK (Reuters) - Wall Street analysts who cover big banks will endure a long night on Thursday, when a barrage of data will show how well the largest U.S. financial institutions can stand up under stress.
The crunch will start at 4:30 p.m. EDT when the U.S. Federal Reserve will release the first of two sets of results from the banks' annual stress tests. Minutes later, more numbers will rain down when banks disclose how they scored themselves.
As the night drags on, the analysts will see vote counts from Britain's referendum on whether to leave the European Union. The referendum is important to banks like JPMorgan Chase & Co (JPM.N: Quote), which has significant staff in Britain to handle European transactions.
"It is going to be all hands on deck," said Barclays bank analyst Jason Goldberg, who postponed his 11-year-old son's birthday dinner to focus on the stress test scores.
Analysts like Goldberg will sort through the scores for clues about how much excess capital the banks have according to regulators, who have overseen the strengthening of lenders' balances sheets since the financial crisis.
Test results are important to investors who want to see the banks return more capital. Goldberg expects the Fed to continue a trend of permitting gradual increases in payouts, with dividends and buybacks rising this time to 80 percent of profits from 75 percent last year.
It is difficult enough to use the annual data dumps to figure out which banks will probably be allowed to use as much capital for payouts as the market expects. That will come after the second test, which banks can actually fail.
This time the outcome of the British referendum may make their analyses moot as far as Friday's stock prices go. Keefe, Bruyette & Woods analysts estimated last week that a decision to leave could reduce 2017 earnings per share by 6.7 percent for JPMorgan, 7.9 percent for Goldman Sachs Group Inc (GS.N: Quote) and 9 percent for Morgan Stanley (MS.N: Quote). Continued...