The Federal Bank says that banks can bear the economic shrinkage and clarify the way to raise profits

Written by House of Schroeder and NUPUR Anand

The Federal Reserve reported on Friday that Washington (Reuters)-Washington, two of the largest banks in the United States in a good position to overcome a severe economic shrinkage and continue lending, as companies maintain strong capital levels even after they suffer from hundreds of billions of dollars from losses.

The results of the annual “Stress Test” of the US Central Bank for the Finance of Big Banks found that companies are still flexible in the face of potential stagnation, rise in unemployment, and market turmoil. The optimistic offer can increase the amount of excessive capital they plan to distribute to shareholders through stock profits or shares.

In total, the test found that banks were exposed to losses of more than $ 550 billion in the Federal Reserve scenario, which led to a decrease in capital levels by 1.8 percentage points. But until then, companies retained more than twice the capital level required by the regulations.

On average, the test found that banks maintain 11.6 % on average of the shared capital of shares 1, much higher than the minimum 4.5 % required.

The results of the annual exam are important for banks because their performance in the exercise places the “capital insulating insulating” that must be carried against the possible losses. These temporary warehouses are usually completed in August, according to federal reserve officials.

Federal Reserve officials said that the relatively clean health bill from the central bank wipes the road to companies to announce capital plans for shareholders as soon as American markets are closed.

“This supports continuing, if not the highest re -purchases of banks”, given that the growth of loans was slow and its public budgets grew, “said Chris Marinak, research director at Jani Montgomery Scott.

“I also think you will see a strategy from banks, as there is more focus on purchases on profits,” he said, noting that the banks that have undergone stress tests have witnessed a 3 % decrease in distinguished stocks during the past five seasons.

Some analysts said strong results can push more banking lending.

“Stress tests have proven that most banks have more than poor backup, so there is evidence that they can use this to stimulate the growth of loans,” said Brian Molberry, the director of the portfolio at Zacks Investment Management. “Given that the American consumer is still strong and the stress test supports its health positions, we may see that banks withdraw some capital and go to lend.”