Early Look at Q3 2009 Preliminary Bank Stress Test Ratings Show Improvement

November 5, 2009 3:19pm by

As of today, our automated tool to gather FDIC bank call reports and generate Stress Index ratings has gathered data on some 5,063 institutions. Users of the professional version of the IRA Bank Monitor can see the ratings on a list we have built on the Bank Monitor home page that is sorted by assets. The largest institution CALL reports in so far start with the Ally Bank unit of GMAC, followed by a unit of Toronto Dominion Bank (NYSE:TD).

Perhaps most important is the fact that the overall level of observed stress in the industry is not rising significantly. You can see the public widget we have built that shows the preliminary ratings for the current quarter and the final ratings for the past quarter by clicking here. One of these days, when Barry actually joins our affiliate program, we are going to build him some little toys using our web technology for visitors to The Big Picture theme park.

The current bank stress index for the smaller banks in the US banking industry is 6.45 vs. 1 for the benchmark year of 1995. Being more than half an order of magnitude above the mean for banking stress is not good. But given that the preliminary rating in Q2 2009 was 6.7, this when we had about 7,000 bank CALL reports available, the overall message from the Stress Index is that levels of pain in the banking industry are about where they were in Q2 2009. You can read our public comment about the Q2 2009 ratings in the Institutional Risk Analyst.

While it is possible that the overall level of industry stress could rise or fall as we see the rest of the FDIC bank units report for Q3 in the next three weeks, we think that this preliminary result confirms the general trend in the industry toward moderating loss rate increases. Since only the 19 Stress Text banks were really under pressure to window dress Q3 results for compliance purposes with the Fed’s SCAP stress tests, the inference we draw is that the rate of change in terms of stress throughout the industry was likewise more moderate in Q3.

Chris

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment. The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client. References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers Please see disclosures here: https://ritholtzwealth.com/blog-disclosures/

twitter

facebook