In a report published on November 15 by Moody’s Investors Services, Moody’s analysts confirmed what I have been suspecting for a few months. U.S. banks’ Common Equity Tier 1 (CET1) has been decreasing. The fact that common equity and retained earnings are decreasing concerns me, because they are what help banks sustain unexpected losses.
U.S. banks’ median Common Equity Tier 1 (CET1) ratio decreased by 40 basis points to 10.7% during the third quarter.
Median capitalization decreased in the third quarter of 2018.Moody’s Investor Services
The decrease in capital is primarily due to banks paying out dividends, since their capital plans were approved in the most recent Comprehensive Capital Analysis and Review (CCAR). A few banks front-loaded their dividend distributions. In its report, Moody’s analysts stated that they “still expect payouts in excess of 100% of earnings to prevail over the next three quarters.
Many banks are paying above 100% in payouts.Moody’s Investor Services
Banks have become very profitable, especially in comparison to where they stood during the 2008 crisis.
Banks are very profitable.
