US banks are on fire, posting double-digit gains in New York.
Financial firms including Citigroup, Bank of America, JP Morgan and now Wells Fargo, have all said they’ve had a profitable first-quarter.
What’s more, it looks like they’re all set to pass the US government’s stress tests. From the New York Times:
For the last eight weeks, nearly 200 federal examiners have labored inside some of the nation’s biggest banks to determine how those institutions would hold up if the recession deepened.
What they are discovering may come as a relief to both the financial industry and the public: the banking industry, broadly speaking, seems to be in better shape than many people think, officials involved in the examinations say.
…
Regulators say all 19 banks undergoing the exams will pass them. Indeed, they say this is a test that a bank simply will not fail: if the examiners determine that a bank needs “exceptional assistance,” the government, that is, taxpayers, will provide it.
But there’s a catch – you’re not allowed to know the details of the test results, at least, not yet. It would put too sudden an end to this rally. From Reuters:
WASHINGTON, April 7 (Reuters) – The U.S. Treasury Department is planning to delay the release of any completed bank stress test results until after the first-quarter earnings season to avoid complicating stock market reaction, a source familiar with Treasury’s discussions said on Tuesday.
The Treasury is still talking about how results of the regulatory stress tests on the 19 largest U.S. banks will be released, and may disclose them as summary results that are not institution-specific, the source said.
(Editor’s note: For the good of the market, this post will self-destruct in T-minus one minute).
Related links:
Word of the day: Notlüge – FT Alphaville
Failing the stress test; or, in the long run, we’re all dead - FT Alphaville
Stressing the stress tests – FT Alphaville
Stress tests debunked – FT Alphaville
Send notes that will self destruct after being read – Privnote