Over the course of the day today, something rather noteworthy happened on Capitol Hill, and it’s had quite an impact on a range of bank stocks. Several banks, including Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Morgan Stanley (NYSE:MS) all sent executives to Washington, D.C. in a bid to testify about new banking regulations. For the most part, investors were happy about the idea.
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Morgan Stanley was up fractionally, Wells Fargo was up significantly, Bank of America was up over 2%, and Citigroup was up over 4% in Wednesday morning’s trading. Only JPMorgan Chase took a hit from the move, down fractionally in the same session.
The bank brass moved on the capital in a bid to inform lawmakers about a proposal that’s threatening the entire banking industry. Known as the “Basel III Endgame,” this proposal—according to several executives called to testify—will have far-reaching and hard-hitting effects on banks and the overall economy. This includes making lending more difficult and, in turn, damaging the economy as a whole.
Regulators, wanting to avoid a lack of liquidity, sought to require banks to add more capital to their operations to better sustain them if losses occurred. Banks, meanwhile, said that was unnecessary, as they already had plenty of capital to back them up.
How Much Capital is “Enough?”
It’s not surprising that the regulators wanted to see balance sheets shored up with plenty of extra capital. Let’s not forget that 2023, in general, was a pretty big year for bank failures. We all remember Silicon Valley Bank, among others, and there was a grand total of five bank failures in 2023. Those were the first failures seen in three years. However, that actually isn’t so bad; there are usually a certain number of bank failures every year. In 2019—just before COVID-19 threw a wrench in literally everything—there were four bank failures. In 2010, there were 157. So, for the banks to insist that there isn’t much of a capitalization problem to fix does make sense.
Which Bank Stocks are a Good Buy Right Now?
Turning to Wall Street, all five of these bank stocks are considered Moderate Buys. However, C stock is the clear laggard in the field, with a 2.84% upside potential on an average price target of $50 per share. Meanwhile, MS stock has a clear edge, with its $90.32 average price target yielding an upside potential of 11.71%.
