By Dan Fitzpatrick
The Federal Reserve revised its stress-test results for 15 large
banks a day after releasing its annual report card, producing a
weaker outcome for Bank of America Corp., American Express Co. and
HSBC North America Holdings Inc.
Despite the changes, 29 of the 30 banks still were said to have
enough capital to continue lending even if faced with a
hypothetical jolt to the economy. Charlotte, N.C.-based Bank of
America was already the worst performer among big U.S. banks in the
test, and Friday's revision dropped its Tier-1 common capital to
5.9% from 6%.
The Fed views 5% as a minimum level allowance.
The Fed measured how 30 large institutions would perform when
faced with a hypothetical shock to the U.S. economy lasting into
2015, including a severe drop in housing prices and a surge in
unemployment.
Fed officials declined to comment Friday about the changes,
which it attributed in a press release partly to "inconsistencies"
in how regulators treated dividend increases or stock buybacks that
occurred in the fourth quarter of 2013.
For 12 banks, including Citigroup Inc. and Goldman Sachs Group
Inc., the revisions resulted in a slightly better test performance
as their capital ratios rose by as much as 0.3%.
The largest rise went to Northern Trust Corp., which moved to
11.7% from 11.4%. The largest drop belonged to American Express
Co., which dropped to 12.1% from 12.6%.
Friday's changes could stoke a continuing source of tension
between banks and regulators. The two sides have clashed in recent
years over the exams and the math used to produce the results, with
banks arguing the Fed doesn't reveal enough about the metrics it is
using.
"This incident represents another embarrassment for the Fed,"
said RBC Capital Markets analyst Gerard Cassidy in a note released
Friday.
The Fed also raised the capital ratio for Zions Bancorp by 0.1%,
to 3.6%, but it wasn't enough to pull the Salt Lake City lender
above the Fed's minimum of 5%. Zions has said it expects to
resubmit its capital plan to the Fed.
Investors and analysts focused Friday on whether Bank of America
would need to downsize its plans to return capital to shareholders
to get approval from the Fed when the central bank releases the
next round of its stress tests on Wednesday. Bank of America shares
fell 2% Friday, as broader bank stocks were mixed.
Write to Dan Fitzpatrick at dan.fitzpatrick@wsj.com