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Barclays Lays Out Some Of Its Expectations For The Bank 'Stress Test' Results

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Barclays Lays Out Some Of Its Expectations For The Bank 'Stress Test' Results

While most traders think of big banks when they think of the Fed stress tests, consumer finance companies’ capital return plans are subjected to the same regulatory scrutiny. With the CCAR results due out next week, Barclays analyst Mark DeVries recently took an in-depth look at what he expects from American Express Company (NYSE: AXP), Discover Financial Services (NYSE: DFS) and Synchrony Financial (NYSE: SYF).

American Express

Barclays anticipates a big boost to capital returns due to its Costco Wholesale Corporation (NASDAQ: COST) portfolio sale. The firm is predicting a combined payout ratio of 147 percent, or roughly $6.0 billion. That payout represents an increase from 122 percent in 2015 and would include a dividend hike from $0.29/share to $0.31/share.

Discover Financial

Barclays is predicting no change to the company’s 2015 payout ratio of around 97 percent. That translates to a dividend hike from $0.28/share to $0.32/share and $1.8 billion in buybacks.

Related Link: Buckingham Sees Limited Downside To Big Banks Ahead Of CCAR Test Results

Synchrony Financial

Synchrony wasn’t required to submit its capital plan to the Fed due to its classification as a savings and loan holding company, but it chose to voluntarily follow a CCAR-like process by testing its plan under the stress test assumptions. Barclays anticipates that Synchrony will likely be on the conservative side when it comes to capital return. The firm is predicting a 49 percent payout ratio, or $1.1 billion in total capital returns.

Disclosure: the author holds no position in the stocks mentioned.

Latest Ratings for AXP

DateFirmActionFromTo
Apr 2021Deutsche BankMaintainsBuy
Apr 2021BarclaysMaintainsEqual-Weight
Apr 2021OppenheimerMaintainsOutperform

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