Big US banks may be able to release up to US$320 billion in capital under revised draft rules unveiled by regulators last month, Morgan Stanley analysts estimated on Wednesday.
Analysts led by Morgan Stanley's Manan Gosalia wrote in a note that 36 banks will have an estimated excess capital of US$320 billion when new capital rules are implemented, 20% above the current US$266 billion.
"Clarity on capital rules is a key catalyst for the banks sector," analysts wrote.
The Federal Reserve said last month that capital levels at big US banks would fall by between 4.8% and 7.8% under softened draft "Basel" and "GSIB surcharge" rules, in a major industry victory that would free up billions of dollars for lending, dividends and share buy-backs. But the exact amount of money that may ultimately be released is unclear.
Morgan Stanley expects the banks to begin giving preliminary ranges of capital they will be able to release once the rules are implemented, during the first-quarter earnings calls.
JPMorgan CEO Jamie Dimon said in the firm's most recent letter to shareholders the bank could have around US$40 billion in excess capital that could be available once the regulatory changes are implemented, although he also added the draft rules were still "flawed".
Some analysts believe implementation won't happen until next year, although Morgan Stanley suggested the changes could be finalized by the third quarter. Banks are currently reviewing the proposals.
The biggest beneficiaries of changes in the risk-weighted asset calculations will be regional banks, the Morgan Stanley analysts said, as the risk attributed to credit is being reduced.
Goldman Sachs and Citigroup are likely to be the stand-out winners from a reduction in the surcharge for globally systemically important banks, or "GSIBs", the Morgan Stanley analysts said.
Source: theedgemalaysia