Federal Reserve Revises Loan-Loss Estimates for Citigroup

The Federal Reserve opted to correct the loan-loss estimates it had figured for Citigroup C in its recent stress test. The Fed released the stress test results last Tuesday. While most banks passed, four did not, including Citigroup. Interestingly, the Fed had planned to released the results later in the week, but JP Morgan JPM preempted the results by issuing a statement saying that the company was increasing its dividend and buying back shares. Ultimately, the Fed's revision did not affect Citigroup's pass or fail status. The Fed decreased the losses on first-lien mortgages by $400 million, but increased estimates for losses on other loans by an offsetting amount. The Fed's stress test assumed a fairly grim economic scenario, with unemployment spiking to 13% and stock values plunging 50%. Still, many critics have alleged that the stress tests are not an accurate portray of how the banks would hold up in an economically stressful environment. Shares of Citigroup are currently trading up over 3.5%. Financials in general are having a good day, with the SPDR Select Sector Fund XLF trading up nearly 1%.