Boston, MA 03/28/2014 (wallstreetpr) – Wells Fargo & Co (NYSE:WFC) stock has smartly recovered from the single digit levels it reached back in March 2009. Compared to its peers in the banking industry — JP Morgan Chase & Co (NYSE:JPM), Citigroup Inc (NYSE:C), and Bank of America Corp (NYSE:BAC) — it also has less litigation worries.
The stock has risen a little over 30% in the past one year and the recent Fed stress test results should reassure investors.
Well Capitalized Bank
The Dodd-Frank stress tests try to analyze how a bank would perform under adverse economic scenarios such as negative GDP growth, rise in unemployment figures to double digits, collapse of housing and commercial real estate prices and the Dow Jones tanking severely. All in all, the Fed tries to see if the major banking institutions would be able to survive a repeat of the financial near-collapse as happened in 2008.
All the four major banks and 29 out of the 30 banks tested came out with flying colors.
One of the most important components of the stress tests is the capital adequacy ranking which measures the bank’s Tier 1 Common Equity Ratio. According to the Fed’s benchmarks, an institution is said to be ‘well capitalized’ if the Common Equity Ratio is more than 6%. Wells Fargo & Co (NYSE:WFC)’s ratio was deemed to be at 8.2% for nine quarters ending December 31, 2015.
Among its peers, JP Morgan and Citigroup are also ‘well capitalized’ while Bank of America is in the ‘adequately capitalized’ category with a ratio of 5.9%.
With its confidence growing, Wells Fargo & Co (NYSE:WFC) is reducing the requirement for FICO scores from 640 to 600 for FHA and VA loans.
Stamp of Approval from Buffett
With the housing market finally turning around and things looking up, Warren Buffett is not the only one who has continued to buy more Wells Fargo stocks. By now, he owns a little more than % of the company making his investment in Wells Fargo & Co (NYSE:WFC) worth even more than his holding in Coca-Cola Company (NYSE:KO).