American Express Exceeds Fed Minimum Capital Level Under Stress Scenario
June 23 2016 - 5:00PM
Dow Jones News
By Robin Sidel
American Express Co. has the capital to keep lending in a severe
economic downturn, the Federal Reserve calculated Thursday in the
first stage of its annual stress tests.
At the low point of a hypothetical recession, AmEx's common
equity Tier 1 ratio, which is a measure of high-quality capital as
a share of risk-weighted assets, was 11.4%, exceeding the 4.5%
level the Fed views as a minimum, the central bank estimated.
AmEx's Tier 1 leverage ratio, which measures high-quality
capital as a share of all assets, was 10.9%, exceeding a 4%
minimum.
The stress tests simulate a world-wide recession. The results
were under the Fed's "severely adverse" scenario of financial
stress, which this year includes a 10% U.S. unemployment rate,
significant losses in corporate and commercial real estate lending
portfolios, and negative rates on short-term U.S. Treasury
securities.
The results will factor into the Fed's decision next week about
whether to approve the bank's plan for rewarding shareholders with
dividends or potential share buybacks. Banks whose capital ratios
dropped close to minimum levels may choose to scale back their
dividend or buyback plans before the Fed announces its final
decision Wednesday. That day the banks can choose to announce
whether they are raising their dividends or buying back more
shares, important for enhancing shareholder returns.
New York-based AmEx has been dealing with some strategic
difficulties over the past year, including the loss of its longtime
co-brand card with Costco Wholesale Corp., but Wall Street has
widely considered the company to be well-capitalized.
Write to Robin Sidel at robin.sidel@wsj.com
(END) Dow Jones Newswires
June 23, 2016 16:45 ET (20:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
American Express (NYSE:AXP)
Historical Stock Chart
From Apr 2024 to May 2024
American Express (NYSE:AXP)
Historical Stock Chart
From May 2023 to May 2024