Thursday, May 7, 2009

My Own Stress Test

Okay - what good would a blog be without my own "reporting". I've done my 5 cent calculations, without any idea of knowing what I'm doing. However, let's see where these stocks go in the next 6 months.

The attached chart gives some basic numbers after the Feds released the bank stress test. I’ve only included those banks named that needed capital, with the exclusion of GMAC.

According to my basic calculations (not very sophisticated), I’ve ranked the banks according to their EPS in 2007 compared to the stock price dilution if the capital were raised solely on issuing more shares. Of course, all of this is relative to the actual losses the banks will take and their ability to replicate their 2007 earnings. Given these parameters, however, I see PNC, Morgan Stanley and Wells Fargo doing better andBOA, Key and Regions on the bottom. Let’s see what happens.

Clicking the link below should take you to a spreadsheet on Google Docs. Please comment if it doesn't work.


  1. Your per share price after additional capital raise is flawed. You need to add the additional capital raised to the market capitalization and divide this new market capitalization by the number of shares outstanding after the capital raise. This will not be dilutive since new capital comes into the bank.

  2. Excellent - Someone to comment on the flaw. Second sheet - any better?