The Fed stress tests from this past week were a positive for many banks. Despite having a tough time getting through the stress tests last year, Citi passed with flying colors this year. It’s done a lot of de-risking over the years, too. Its Citi Holdings portfolio, which contains its problem assets, only makes up 5% of its total assets as of the end of 2014. At the end of 2013, it was 16%.
Now, Bank of America only got conditional approval for its capital plan. It has until the end of September to submit a new plan.
But it’s worth noting that the company’s overall capital ratios improved year-over-year, and it got approval for a $4 billion buyback. The bank also got no objection to its current 5 cents a share quarterly dividend – meaning its 1.3% dividend yield is safe.
In the end, the fact that Citi and Bank of America are making headway in terms of corporate governance, along with the fact that they are two of the cheapest banks around, makes them a bit more enticing from an investment perspective.
This article is brought to you courtesy of Marshall Hargrave from Wyatt Research.