Bank of America Releases Mid-Year Stress Test Results

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 [e-mail]

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