Checking in on U.S. Bank Stocks
Apr 03, 2020 | Frank Sakellariou
Given that the U.S. Banking sector tends to have a presence in most investment portfolios, we thought it would be important to update you on the impacts of COVID-19 and how the sector has grown much more resilient to navigate periods of economic uncertainty.
RBC Wealth Management hosted a call recently with Gerard Cassidy, Head of U.S. Bank Equity Strategy and Large Cap Bank Analyst at RBC Capital Markets.
Gerard reminds us that the financial crisis of 2008 actually started with the banking system, this is not the case today, in fact the banks are now part of the solution.
“There is a very significant difference between today and 2008/2009 between what’s going on with the banks…this crisis is a healthcare crisis”
Following the Global Financial Crisis, regulation became much more stringent for the banks. Banks are now required to go through a Stress Test every year. A Bank Stress Test is an exercise that allows regulators to understand a bank's financial strength – it helps ensure that banks are resilient enough to navigate through periods of economic stress.
All the big U.S. banks have passed these tests.
The capital of the U.S. banks is 50% higher today than during 2007. Also, liquidity as measured by cash instruments, makes up 25% of the banks’ balance sheets today vs. 10% in 2007.
For the past number of years the banks have done things that have put them in a much better position to deal with unexpected economic dislocations.
To learn more, please click on the following link to listen to Gerard Cassidy’s 20 minute interview: Checking in on U.S. bank stocks.
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