MKM Partners Lists 5 Mega-Banks Worth Buying Post-Stress Test

In a report published Wednesday evening, MKM Partners analyst David Trone examined five mega-banks investors should consider following the release of the Stress Test results. "The Fed released Comprehensive Capital Analysis and Review (CCAR) results that disclosed approved amounts of capital distribution for each bank over the next four quarters (2Q15 to 1Q16)," Trone wrote. "Our long-standing thesis was that 2015 CCAR outcomes would be materially better than 2014, and more even." Here is the list of five Buy-rated banks: 1.

($56 price target) was approved for $7.8 billion in buybacks – 10 percent higher than Trone estimated and an in-line dividend hike per share to $0.05 from $0.01. The analyst noted that the total return approval was about $8.4 billion versus his $7 billion expectations. 2.

($18 price target) was approved for $4 billion in buybacks, while dividends remain unchanged at $0.05 per share, bringing its total capital return approval to $6.1 billion versus Trone's $3.1 billion. The analyst added that the company was given conditional approval to resubmit its plans in September and can proceed with a buyback in the meantime. 3.

($65 price target) was approved for a $6.4 billion buyback, missing Trone's $7.0 estimate while the bank's per share dividend increase to $0.44 from $0.40 was better than he expected. However, the bank's total capital return approval was $12.9 billion (versus expectations for $13.2 billion), implying a "marginally negative" outcome but shares could "still improve in the absolute." 4.

($213 price target) was approved for a dividend increase to $0.65 from $0.60 per share, larger than Trone's estimated hike to $0.62 per share. At the same time, the bank was also approved to buyback stock but its policy of not disclosing their approved buyback amount remained in place. 5.

($41 price target) was approved for $3.1 billion in buybacks and a per share dividend increase to $0.15 from $0.10. As a whole, the bank's capital return approval of 4.3 billion exceeded Trone's $1.9 billion estimate.