巴克莱-美股-银行业-CCAR 2020 2.0：股票回购可以恢复，但派息率有上限-2020.12.20-27页

CORE
Equity Research
20 December 2020
U.S. Large-Cap Banks

CCAR 2020 2.0: Share Repurchases
INDUSTRY UPDATE
Can Resume but Payout Ratio Capped

POSITIVE
Unchanged
Every bank under coverage ‘passed’ the Fed’s COVID-19 stress tests. Friday, after the
close, the Fed released its second round of bank stress test results this year. It showed U.S. Large-Cap Banks
Jason M. Goldberg, CFA
that the large U.S. banks had strong capital levels under two separate hypothetical
+1 212 526 8580
recessions. Looking at CET1, every bank exceeded the 4.5% requirement under both
jason.goldberg@barclays.com
the alternative severe and the severely adverse scenarios. NTRS, MS, BK, STT and JPM
BCI, US
'passed' by the most, while MTB, CFG, RF, COF and ALLY stood out on the other end.
Under both cases, our composite’s current ACL covers roughly 40% of projected losses Inna Blyakher
at the median bank. This is in-line with June’s severely adverse scenario. Still, what +1 212 526 3904
inna.blyakher@barclays.com
struck us was the surge in the CRE loss rates in the most recent exam relative to prior
BCI, US
ones, driven how deferrals were treated, we believe. This particularly weighed on MTB.
Matthew Kesselhaut
Share repurchases can resume in 1Q21 but the total payout ratio is capped at 100%, +1 212 526 0181
while dividend increases remain on hold. As percentage of shares outstanding, we matthew.kesselhaut@barclays.com
believe BK, MS, STT and GS (between 1.5-1.8%) followed by MTB, BAC, ALLY and C BCI, US
(0.9-1.0%) have the greatest capacity to repurchase shares in 1Q21. Note we omit PNC
Eugene Koysman
because it is expected to refrain from share repurchase near-term given its pending
+1 212 526 0971
acquisition of BBVA USA. Keep in mind, while a couple of banks announced large share
Eugene.Koysman@barclays.com
repurchase programs (JPM at 8%, MS at 10%), they will be limited near-term. We also BCI, US
believe COF could opt to increase its dividend.
Brian Morton, CFA
While share repurchase will be modest near-term, we expect it to increase as the +1 212 526 2163
year progresses. The median bank will only be able to repurchase less than 1% of its brian.morton@barclays.com
Restricted - Internal
shares in 1Q21. Still, we believe this symbolic gesture bodes well for increased capital BCI, US
return, as next year develops. We would expect the Fed to shift from its current
backward looking income-based approach to its CCAR/SCB framework at some point
in 2021. Still, if it doesn’t, trailing 4-quarter average earnings should increase as very
pressured 1H20 earnings roll-off, and as loan loss reserve releases increase as 2021
progresses. Relative to their internal capital targets (either disclosed or estimated) and
adjusting for pending acquisitions, we believe MS, ALLY, WFC, COF and BAC have the
most excess capital as a percent of their market cap.
While it is uncertain if the Fed will update the SCB, with banks getting credit for
heavy 1H20 loan loss reserve builds, the impact is modest for most. The Fed said it
will tell the banks whether their SCB will be recalculated by March 31. Generally,
speaking, we did not see significant changes as higher expected loan losses were
mitigated by prior loan loss reserve builds, except for those with large loan deferrals. In
addition, those with market sensitive revenues seemed to fare better. GS, MS, ALLY and
RF witnessed the greatest reductions in their SCB, while MTB posted the largest
increase. All other banks witnessed less than 40bps of variation.
Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with
companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors
should consider this report as only a single factor in making their investment decision.
PLEASE SEE ANALYST CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 20.
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Barclays | U.S. Large-Cap Banks
Overview
Friday, after the close, the Fed released its second round of bank stress test results this
year. The results showed that the large U.S. banks had strong capital levels under two
separate hypothetical recessions. In addition, the Fed updated its near-term capital
return framework. Recall, the banks were prohibited from repurchasing shares, increasing
their dividends and had their dividend payout ratios (on trailing four quarter earnings)
capped at 100% in 3Q20 and 4Q20. For 1Q21, the banks will be allowed to resume share
repurchase, though dividends will generally remain unchanged and total payout ratios
will have to remain under 100%. While the median bank will only be able to repurchase
less than 1% of its shares in 1Q21, we believe this symbolic gesture bodes well for
increased capital return, as next year progresses. We would expect the Fed to shift from
this backward looking income-based approach to its CCAR/SCB framework at some point
during 2021. Still, if it doesn’t, trailing 4-quarter average earnings should increase as very
pressured 1H20 earnings roll-off and as loan loss reserve releases increase as 2021
progresses.
Near-term Capital Return

For 1Q21, both dividends and share repurchase will be limited to an amount based on
income over the past year. Banks cannot exceed 100% total payout ratio (based on FR Y-
9C, Schedule HI, line item 14 which is excludes preferreds, we believe) and their dividend
cannot exceed 2Q20. Recall, every bank’s current dividend equals 2Q20, except for COF
and WFC, which lowered their dividends in 3Q20. Banks can also redeem tier 1 and tier 2
capital instruments. As percentage of shares outstanding, we believe BK, MS, STT and GS
(between 1.5-1.8%) followed by MTB, BAC, ALLY and C (0.9-1.0%) have the greatest
capacity to repurchase shares in 1Q21. Note we omit PNC because it is expected to
refrain from share repurchase near-term given its pending acquisition of BBVA USA. We
also display what 2Q21 could look like in Figure 1 in case the Fed keeps this construct for
another quarter in front of the typical June CCAR exam.
FIGURE 1
Share Repurchase Potential ($bn, except per share amounts)
Four quarter
Actual / Consensus EPS (before Share Repurchase at 100%
average for the Dividend
preferred) Payout After Current Dividend
quarter ended
1Q21 2Q21
Current Dividend 1Q21 1Q21 2Q21 2Q21
1Q20A 2Q20A 3Q20A 4Q20E 1Q21E 4Q20E 1Q21E Dividend Dividend
Dividend Yield ($) (%) ($) (%)
Payout Payout
ALLY -$0.85 $0.64 $1.26 $0.98 $0.89 $0.51 $0.94 $0.19 2.2% 37% 20% $120 0.9% $284 2.2%
BAC $0.45 $0.40 $0.56 $0.53 $0.57 $0.49 $0.51 $0.18 2.5% 37% 35% $2,681 1.1% $2,932 1.2%
BK $1.09 $1.07 $1.05 $0.94 $0.95 $1.04 $1.00 $0.31 3.1% 30% 31% $648 1.8% $615 1.7%
C $1.19 $0.63 $1.54 $1.31 $1.79 $1.16 $1.31 $0.51 3.4% 44% 39% $1,370 1.1% $1,685 1.3%
CFG $0.08 $0.59 $0.73 $0.97 $0.78 $0.59 $0.77 $0.39 4.4% 66% 51% $87 0.6% $162 1.1%
COF -$2.93 -$2.01 $5.25 $2.68 $2.61 $0.75 $2.13 $0.10 0.4% 13% 5% $296 0.7% $931 2.2%
FITB $0.06 $0.27 $0.81 $0.73 $0.60 $0.47 $0.60 $0.24 3.5% 51% 40% $164 0.8% $260 1.3%
GS $3.36 $1.02 $10.05 $6.56 $6.89 $5.25 $6.13 $1.25 2.1% 24% 20% $1,439 1.6% $1,756 2.0%
HBAN $0.05 $0.15 $0.29 $0.31 $0.31 $0.20 $0.27 $0.15 4.8% 75% 56% $51 0.4% $120 0.9%
JPM $0.92 $1.52 $3.06 $2.48 $2.48 $2.00 $2.39 $0.90 3.0% 45% 38% $3,379 0.9% $4,581 1.2%
KEY $0.15 $0.19 $0.44 $0.45 $0.43 $0.31 $0.38 $0.19 4.7% 60% 49% $118 0.8% $187 1.2%
MS $1.08 $2.05 $1.66 $1.19 $1.44 $1.50 $1.59 $0.35 2.2% 23% 22% $1,796 1.8% $1,936 1.9%
MTB $1.91 $1.88 $2.90 $3.09 $2.62 $2.44 $2.62 $1.10 3.5% 45% 42% $172 1.1% $195 1.2%
NTRS $1.70 $1.49 $1.40 $1.51 $1.43 $1.52 $1.46 $0.70 3.1% 46% 48% $172 0.9% $158 0.8%
PNC $2.10 $8.53 $3.54 $2.67 $2.12 $4.21 $4.21 $1.15 3.2% 27% 27% $1,303 2.1% $1,305 2.1%
RF $0.17 -$0.22 $0.55 $0.43 $0.40 $0.23 $0.29 $0.16 4.0% 67% 53% $74 0.5% $130 0.9%
STT $1.77 $1.95 $1.55 $1.69 $1.47 $1.74 $1.67 $0.52 2.9% 30% 31% $436 1.7% $409 1.6%
TFC $0.78 $0.70 $0.84 $1.01 $0.92 $0.83 $0.87 $0.45 3.8% 54% 52% $519 0.8% $565 0.9%
USB $0.77 $0.46 $1.05 $0.98 $0.86 $0.81 $0.84 $0.42 3.7% 52% 50% $593 0.9% $627 0.9%
WFC $0.16 -$0.58 $0.49 $0.67 $0.56 $0.19 $0.29 $0.10 1.3% 54% 35% $357 0.3% $776 0.6%
Median 3.1% 45% 38% 0.9% 1.2%
Source: Barclays Research, Company reports and Bloomberg
20 December 2020 2
FIGURE 2
Share Repurchase Capacity for 1Q21 as Percent of Shares Outstanding
2.5%
Likely out of the market due to pending acquisitions
2.0%
1.5%
1.0%
0.5%
0.0%
Source: Barclays Research and Bloomberg
GSIB Company Comments

 BAC: No comment. Still, we would expect it to resume share repurchase in 1Q21.
 BK: During 1Q21, expects to maintain its dividend and resume share repurchase.
 C: Said the Fed authorized it to take certain capital actions during 1Q21. Expects to
continue its planned capital actions through the remaining quarters of the 2020 CCAR
cycle (1Q21-3Q21), which included a quarterly dividend of $0.51, and it is intention to
resume share repurchase.
 GS: Intends to resume share repurchases in 1Q21.
 JPM: Intends to maintain its dividend of $0.90 for 1Q21. It also authorized a new
repurchase program of $30bn (8% of its shares). It intends to begin share repurchase in
1Q21. Still, we note, despite the $30bn headline figure, JPM’s 1Q21 buyback is capped
in the $3bn area.
 MS: Said it was notified that it would be permitted to resume share repurchases in
1Q21. Its Board authorized the repurchases of $10bn (10% of its shares) in 2021. Note,
we expect ETFC (closed in 4Q20) to be modestly (~30bps) additive to its CET1 ratio,
while EV (~80bps) should be dilutive (2Q21 close expected).
 STT: Announced it’s authorized by the Fed to continue its dividend at current levels and
to resume repurchasing shares in 1Q21.
 WFC: Said as long as it does not increase its dividend, for 1Q21 it can repurchase
shares. It intends to provide additional information on its capital distribution plans on its
Jan 15 4Q20 EPS call. Note, while WFC would appear to have a payout ratio over 100%
based on EPS, using net income after tax but before preferred dividends (which we
believe is the metric the payout ratio is based on), would put it under 100%.
Non-GSIB Company Comments

 CFG: Said its YTD PPNR/average assets is 3.9% and is projected to “remain strong” for
4Q20, compared to 2.0% under the severely adverse scenario. CFG continues to believe
the Fed PPNR model remain inaccurate, overstating its PPNR.
 No other Super Regional bank commented publicly.
20 December 2020 3
Stressed Capital Buffer & Excess Capital

As a result of a capital plan resubmission, the Fed may elect to recalculate a bank’s stress
capital buffer (SCB) requirement. The Fed is required to provide notice of whether the
bank’s SCB will be recalculated within 75 calendar days after the date on which the capital
plan is resubmitted, unless the Fed provides notice to the firm that it is extending the time
period. Due to uncertainty about future economic conditions and the ultimate path of the
current recovery, the Fed said on Friday it is extending the time period to notify banks
whether their SCB requirements will be recalculated until March 31. Note, the Fed also
affirmed the CCyB at 0%, which influences the SCB for the GSIBs.
Figure 4 compares the SCB confirmed over the summer relative to what we calculated
Friday night. Generally speaking, we did not see significant changes as higher than
expected loan losses were mitigated by prior loan loss reserve builds, except for those
with large loan deferrals. In addition, those with market sensitive revenues seemed to
fare better. GS, MS, ALLY and RF witnessed the greatest reductions in their SCB, while
MTB posted the largest increase. All other banks witnessed less than 40bps of variation.
While Figure 3 shows what the updated SCB and minimum capital requirements would look
like, we believe it’s more likely the that Fed will wait until the June CCAR 2021 process to
update the SCBs. Nevertheless, we believe each company’s internal target is probably more
informative and is its binding constraint (Figure 5). Relative to their internal capital targets
(either disclosed or estimated) and adjusting for pending acquisitions, we believe MS, ALLY,
WFC, COF and BAC have the most excess capital as a percent of their market cap.
FIGURE 3
SCB Calculations
SCB 2.0 Calculation (vs. 1.0) Possible Updated Capital Requirement
F=Greater of E M=I+J+K+
A B C=A-B D E=C+D G H=F-G I J=F K L
or 2.5% L
DFAST 4-quarter Stress Stress
Stress Stress Min Updated
SA CET1 CET1 dividend capital capital GSIB
Ticker test capital buffer Diff require SCB 2.0 CCyB requirem
2Q20 proj. add-on as a buffer buffer charge
losses 2.0 ment ent
min % of RWA (calc) (1.0)
ALLY 10.1% 7.4% 2.7% 0.2% 2.9% 2.9% 3.5% -0.6% 4.5% 2.9% 0.0% 0.0% 7.4%
BAC 11.6% 9.3% 2.3% 0.4% 2.7% 2.7% 2.5% 0.2% 4.5% 2.7% 2.5% 0.0% 9.7%
BK 12.7% 11.9% 0.8% 0.7% 1.5% 2.5% 2.5% 0.0% 4.5% 2.5% 1.5% 0.0% 8.5%
C 11.8% 9.6% 2.2% 0.4% 2.5% 2.5% 2.5% 0.0% 4.5% 2.5% 3.0% 0.0% 10.0%
CFG 9.6% 6.3% 3.3% 0.5% 3.8% 3.8% 3.4% 0.4% 4.5% 3.8% 0.0% 0.0% 8.3%
COF 12.4% 7.1% 5.3% 0.1% 5.3% 5.3% 5.6% -0.3% 4.5% 5.3% 0.0% 0.0% 9.8%
FITB 9.7% 7.5% 2.2% 0.5% 2.7% 2.7% 2.5% 0.2% 4.5% 2.7% 0.0% 0.0% 7.2%
GS 13.3% 8.5% 4.8% 0.3% 5.1% 5.1% 6.6% -1.5% 4.5% 5.1% 2.5% 0.0% 12.1%
HBAN 9.8% 8.0% 1.8% 0.7% 2.6% 2.6% 2.5% 0.1% 4.5% 2.6% 0.0% 0.0% 7.1%
JPM 12.4% 10.0% 2.4% 0.7% 3.1% 3.1% 3.3% -0.2% 4.5% 3.1% 3.5% 0.0% 11.1%
KEY 9.1% 7.7% 1.4% 0.5% 1.9% 2.5% 2.5% 0.0% 4.5% 2.5% 0.0% 0.0% 7.0%
MS 16.5% 12.4% 4.1% 0.5% 4.7% 4.7% 5.7% -1.0% 4.5% 4.7% 3.0% 0.0% 12.2%
MTB 9.5% 5.0% 4.5% 0.5% 5.1% 5.1% 2.5% 2.6% 4.5% 5.1% 0.0% 0.0% 9.6%
NTRS 13.4% 12.6% 0.8% 0.8% 1.6% 2.5% 2.5% 0.0% 4.5% 2.5% 0.0% 0.0% 7.0%
PNC 11.3% 9.6% 1.7% 0.6% 2.2% 2.5% 2.5% 0.0% 4.5% 2.5% 0.0% 0.0% 7.0%
RF 8.9% 7.1% 1.8% 0.5% 2.3% 2.5% 3.0% -0.5% 4.5% 2.5% 0.0% 0.0% 7.0%
STT 12.3% 11.4% 0.9% 0.7% 1.6% 2.5% 2.5% 0.0% 4.5% 2.5% 1.0% 0.0% 8.0%
TFC 9.7% 7.8% 1.9% 0.6% 2.5% 2.5% 2.7% -0.2% 4.5% 2.5% 0.0% 0.0% 7.0%
USB 9.0% 7.6% 1.4% 0.6% 2.1% 2.5% 2.5% 0.0% 4.5% 2.5% 0.0% 0.0% 7.0%
WFC 11.0% 8.3% 2.7% 0.1% 2.8% 2.8% 2.5% 0.3% 4.5% 2.8% 2.0% 0.0% 9.3%
Median 11.1% 8.2% 2.2% 0.5% 2.6% 2.6% 2.5% 2.5% 4.5% 2.63% 0.0% 0.0% 8.1%
Source: Barclays Research, Company reports and Federal Reserve
20 December 2020 4
FIGURE 4
SCB 1.0 vs. SCB 2.0 and Difference (lower is better)
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
-2.0%
SCB 2.0 SCB 1.0 Difference
Source: Barclays Research and Federal Reserve
FIGURE 5
Excess Capital, 3Q20 ($bn)
Min Stress 4Q20 3Q20 Excess/ Internal Excess/

G-SIB Excess Excess Excess
Ticker require capital CCyB Require CET1 Market Target Market
charge (%) ($) ($)
ment buffer ment Ratio Cap (mid pnt) Cap
ALLY 4.5% 3.5% 0.0% 0.0% 8.0% 10.4% 2.4% $3.3 30% 9.00% A $1.9 17%
BAC 4.5% 2.5% 2.5% 0.0% 9.5% 11.9% 2.4% $34.6 15% 10.25% A $23.6 10%
BK 4.5% 2.5% 1.5% 0.0% 8.5% 13.5% 5.0% $7.9 23% 11.50% E $3.2 9%
C 4.5% 2.5% 3.0% 0.0% 10.0% 11.8% 1.8% $21.2 20% 11.50% A $3.1 3%
CFG 4.5% 3.4% 0.0% 0.0% 7.9% 9.8% 1.9% $2.8 20% 9.88% A -$0.1 -1%
COF 4.5% 5.6% 0.0% 0.0% 10.1% 13.0% 2.9% $8.4 22% 11.00% A $5.9 15%
FITB 4.5% 2.5% 0.0% 0.0% 7.0% 10.1% 3.1% $4.4 24% 9.50% A $0.9 5%
GS 4.5% 6.6% 2.5% 0.0% 13.6% 14.5% 0.9% $4.8 6% 13.25% A $6.7 8%
HBAN 4.5% 2.5% 0.0% 0.0% 7.0% * 9.9% 2.9% $2.6 21% 9.50% A $0.3 3%
JPM 4.5% 3.3% 3.5% 0.0% 11.3% 13.1% 1.7% $26.2 7% 11.75% A $19.8 6%
KEY 4.5% 2.5% 0.0% 0.0% 7.0% 9.5% 2.5% $3.3 22% 9.25% A $0.3 2%
MS 4.5% 5.7% 3.0% 0.0% 13.2% ** 16.4% 3.2% $13.1 14% 12.50% E $15.9 18%
MTB 4.5% 2.5% 0.0% 0.0% 7.0% 9.8% 2.8% $3.0 19% 8.50% E $1.4 9%
NTRS 4.5% 2.5% 0.0% 0.0% 7.0% 13.4% 6.4% $4.7 24% 11.00% E $1.8 9%
PNC 4.5% 2.5% 0.0% 0.0% 7.0% *** 9.3% 2.3% $7.6 14% 8.50% A $2.7 5%
RF 4.5% 3.0% 0.0% 0.0% 7.5% 9.3% 1.8% $2.0 13% 10.00% A -$0.8 -5%
STT 4.5% 2.5% 1.0% 0.0% 8.0% 12.4% 4.4% $4.9 20% 10.50% E $2.2 9%
TFC 4.5% 2.7% 0.0% 0.0% 7.2% 10.0% 2.8% $10.6 17% 10.00% A $0.2 0%
USB 4.5% 2.5% 0.0% 0.0% 7.0% 9.4% 2.4% $9.6 15% 8.50% A $3.7 6%
WFC 4.5% 2.5% 2.0% 0.0% 9.0% 11.4% 2.4% $28.1 27% 10.00% A $16.3 15%
Median 4.5% 2.5% 0.0% 0.0% 7.9% 10.9% 2.4% 20% 10.00% 7%
Sum 12.1% $203.2 15% $108.8 8%
A: Actual. E: Estimate. * Pro forma for acquisition of TCF. ** Pro forma for acquisitions of ETFC and EV. *** Pro forma
for acquisition of BBVA USA. Source: Barclays Research, Federal Reserve, Company reports, and Bloomberg
Stress Test Results

As detailed later, the stress test results included two hypothetical scenarios with severe
global recessions. The first scenario featured an unemployment rate that spiked to 12.5%
and then declined to about 7.5%, while the second scenario included a peak unemployment
rate of 11% followed by a more modest decline to 9%. Under both scenarios, large banks
would collectively have more than $600bn in total losses, considerably higher than the first
stress test this year. However, their capital ratios would decline from an average starting
point of 12.2% to 9.6% in the more severe scenario, well above the 4.5% minimum. All
banks’ risk-based capital ratios would remain above the required minimum.
20 December 2020 5
Looking at CET1, every bank under coverage exceeded the 4.5% requirement under
both the alternative severe scenario and the severely adverse scenario. NTRS, MS, BK,
STT and JPM 'passed' by the most, while MTB, CFG, RF, COF and ALLY stood out on the
other end. For 8 banks (MS, GS, MTB, BAC, ALLY, TFC, CFG, RF) the minimum CET1 ratio
under the alternative severe scenario was less than the severely adverse scenario, for 6
(NTRS, JPM, PNC, WFC, KEY, FITB) they were the same, and for 6 (STT, HBAN, C, USB, BK,
COF) the severely adverse scenario was less than the alternative severe scenario.
FIGURE 6
Minimum CET1 Ratio, Severely Adverse and Alternative Severe Scenarios
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Severely adverse Alternative severe Minimum Requirement
Loan Loss Analysis

Figure 7 examines the 9-quarter projected loan losses under the alternative severe
scenario and the severely adverse scenario. Under both cases, our composites current
ACL covers roughly 40% of projected losses at the median bank. This is in-line with the
severely adverse scenario from June.
FIGURE 7
Allowance for Credit Losses Relative to CCAR 2020 2.0 Nine-Quarter Losses ($bn)
As % of Loans CCAR 2.0 Severely Adverse Losses
1Q20 2Q20 3Q to 1Q20 3Q20 ACL/ Sev- ACL/ Alterna ACL/

4Q19 CECL 1Q20 2Q20 3Q20 3Q20 4Q19 CECL 1Q20 2Q20 2Q20 3Q20
ACL ACL 2Q % ACL ACL LTM erely DFAST tive DFAST
ACL 'Day 1' ACL ACL ACL Chg ACL ACL 'Day 1' ACL ACL Chg ACL ACL
Chg Chg Chg Chg Chg NCO adverse Losses severe Losses
ALLY $1.3 $1.3 $0.6 $3.2 $0.1 $3.4 $0.025 $3.4 1% 0.99% 1.05% 0.50% 2.53% 0.31% 2.84% 0.03% 2.86% 3.9x $8.1 42% $7.7 70%
BAC $10.2 $3.3 $3.6 $17.1 $4.0 $21.1 $0.406 $21.5 2% 1.04% 0.28% 0.31% 1.63% 0.48% 2.11% 0.14% 2.25% 5.1x $60.2 36% $57.9 37%
BK $0.2 ($0.1) $0.2 $0.3 $0.1 $0.5 $0.011 $0.5 2% 0.39% -0.07% 0.20% 0.53% 0.31% 0.84% 0.04% 0.88% 121.5x $1.6 30% $1.6 30%
C $14.2 $4.1 $4.5 $22.8 $5.7 $28.5 $0.310 $28.9 1% 2.03% 0.54% 0.59% 3.16% 1.00% 4.16% 0.16% 4.33% 3.5x $55.9 52% $52.7 55%
CFG $1.3 $0.5 $0.5 $2.2 $0.3 $2.5 $0.209 $2.7 8% 1.09% 0.32% 0.33% 1.73% 0.28% 2.01% 0.20% 2.21% 4.4x $8.6 32% $8.3 33%
COF $7.2 $3.3 $3.6 $14.1 $3.0 $17.1 ($0.816) $16.2 -5% 2.71% 1.27% 1.37% 5.35% 1.43% 6.78% -0.24% 6.54% 2.7x $42.6 38% $39.7 41%
FITB $1.3 $0.7 $0.5 $2.5 $0.4 $2.9 ($0.116) $2.8 -4% 1.23% 0.50% 0.40% 2.13% 0.36% 2.50% -0.01% 2.49% 5.9x $9.3 30% $9.0 31%
GS $1.8 $0.8 $0.6 $3.2 $1.2 $4.4 ($0.060) $4.3 -1% 1.63% 0.49% 0.32% 2.44% 1.19% 3.63% 0.07% 3.70% 3.9x $13.5 32% $13.4 32%
HBAN $0.9 $0.4 $0.3 $1.6 $0.2 $1.8 $0.057 $1.9 3% 1.18% 0.48% 0.40% 2.05% 0.22% 2.27% 0.04% 2.31% 4.6x $5.0 38% $4.8 39%
JPM $14.3 $4.3 $6.8 $25.4 $8.9 $34.3 ($0.663) $33.6 -2% 1.43% 0.38% 0.60% 2.42% 0.98% 3.40% 0.00% 3.40% 5.9x $70.1 48% $67.1 50%
KEY $1.0 $0.3 $0.3 $1.5 $0.4 $1.9 $0.032 $1.9 2% 1.03% 0.22% 0.22% 1.47% 0.32% 1.80% 0.08% 1.88% 4.8x $5.8 33% $5.7 34%
MS $0.6 $0.1 $0.2 $0.9 $0.2 $1.2 $0.093 $1.3 8% 0.45% 0.08% 0.12% 0.65% 0.12% 0.77% 0.04% 0.81% NA $7.2 17% $7.1 18%
MTB $1.0 $0.1 $0.2 $1.4 $0.3 $1.6 $0.121 $1.8 7% 1.12% 0.13% 0.22% 1.47% 0.21% 1.68% 0.11% 1.79% 9.2x $9.2 19% $8.8 20%
NTRS $0.1 $0.0 $0.1 $0.2 $0.1 $0.3 $0.001 $0.3 0% 0.40% 0.02% 0.10% 0.52% 0.27% 0.79% 0.03% 0.82% NM $2.0 13% $2.0 13%
PNC $3.1 $0.6 $0.7 $4.4 $2.2 $6.6 ($0.150) $6.4 -2% 1.28% 0.19% 0.20% 1.66% 0.89% 2.55% 0.03% 2.58% 7.9x $15.8 41% $15.4 42%
RF $0.9 $0.5 $0.3 $1.7 $0.8 $2.4 $0.000 $2.4 0% 1.10% 0.53% 0.26% 1.89% 0.79% 2.68% 0.07% 2.74% 4.7x $6.0 40% $5.8 42%
STT $0.1 $0.0 $0.0 $0.1 $0.0 $0.2 ($0.010) $0.2 -6% 0.35% 0.00% 0.03% 0.38% 0.23% 0.61% -0.04% 0.57% 4.5x $1.3 12% $1.3 12%
TFC* $1.9 $3.1 $0.6 $5.6 $0.5 $6.1 $0.096 $6.2 2% 0.63% 0.95% 0.18% 1.76% 0.19% 1.95% 0.06% 2.01% 5.6x $19.2 32% $18.4 34%
USB $4.5 $1.5 $0.6 $6.6 $1.3 $7.9 $0.120 $8.0 2% 1.52% 0.40% 0.16% 2.07% 0.47% 2.54% 0.07% 2.61% 4.6x $23.1 35% $22.1 36%
WFC $10.5 ($1.3) $2.9 $12.0 $8.4 $20.4 $0.100 $20.5 0% 1.10% -0.09% 0.19% 1.20% 1.02% 2.23% 0.05% 2.28% 5.9x $59.9 34% $57.8 35%
Sum $76 $24 $27 $127 $38 $165 ($0.235) $165 0% $424 39% $407 41%
Median 1% 1.10% 0.35% 0.24% 1.75% 0.34% 2.25% 0.05% 2.30% 4.7x 34% 35%
Median (ex trust banks, brokers) 1.12% 0.40% 0.31% 1.89% 0.47% 2.50% 0.06% 2.49% 4.8x 36% 37%
* Does not incorporate $2.7bn unamortized loan mark. Source: Barclays Research, Federal Reserve and Company reports
20 December 2020 6
FIGURE 8
3Q20 ACL Relative to 9-Quarter Severely Adverse Losses CCAR 2020 2.0
60%
50%
40%
30%
20%
10%
0%
* Does not incorporate $2.7bn unamortized loan mark.

Source: Barclays Research, Federal Reserve and Company reports
In aggregate, projected loan loss for our coverage increased 20% from the June test to
Friday’s test. Still, banks received credit for the large loan loss reserve builds in 1H20. Of
note, in June's CCAR, our coverage put up $399bn in loan loss provisions, which was $45bn
greater than $353bn of net charge-offs. Still, while net charge-offs increased to $424bn, a
lower $353bn of loan loss provisioning is needed (Figure 9).
FIGURE 9
Comparing Loan Losses and Provision, CCAR 2020 1.0 vs. 2.0 ($bn)
CCAR 2020 2.0 CCAR 2020 1.0 CCAR 2.0 vs 1.0
Loan Loan Loan
Provision $ Diff % Diff Provision $ Diff % Diff Provision
losses losses losses
ALLY $7.0 $8.1 -$1.1
-14% $10.1 $8.1 $2.0 25% -31% 0%
BAC $51.8 $60.2 -$8.4
-14% $53.1 $47.2 $5.9 13% -2% 28%
BK $1.6 $1.6 $0.0 0% $1.8 $1.5 $0.3 20% -11% 7%
C $40.0 $55.9 -$15.9
-28% $50.0 $47.7 $2.3 5% -20% 17%
CFG $8.2 $8.6 -$0.4-5% $8.0 $6.7 $1.3 19% 2% 28%
COF $35.8 $42.6 -$6.8
-16% $47.7 $41.2 $6.5 16% -25% 3%
FITB $8.2 $9.3 -$1.1
-12% $8.5 $7.4 $1.1 15% -4% 26%
GS $11.8 $13.5 -$1.7
-13% $11.1 $9.8 $1.3 13% 6% 38%
HBAN $4.1 $5.0 -$0.9
-18% $4.3 $3.8 $0.5 13% -5% 32%
JPM $52.1 $70.1 -$18.0
-26% $72.3 $64.4 $7.9 12% -28% 9%
KEY $5.0 $5.8 -$0.8
-14% $5.6 $5.1 $0.5 10% -11% 14%
MS $7.6 $7.2 $0.4 6% $6.5 $5.3 $1.2 23% 17% 36%
MTB $8.9 $9.2 -$0.3-3% $5.7 $5.0 $0.7 14% 56% 84%
NTRS $2.2 $2.0 $0.2
10% $2.2 $1.8 $0.4 22% 0% 11%
PNC $12.6 $15.8 -$3.2
-20% $13.2 $12.1 $1.1 9% -5% 31%
RF $5.0 $6.0 -$1.0
-17% $6.3 $5.3 $1.0 19% -21% 13%
STT $1.5 $1.3 $0.2
15% $1.4 $1.2 $0.2 17% 7% 8%
TFC $17.3 $19.2 -$1.9
-10% $19.3 $15.3 $4.0 26% -10% 25%
USB $19.8 $23.1 -$3.3
-14% $18.6 $17.1 $1.5 9% 6% 35%
WFC $52.0 $59.9 -$7.9
-13% $52.9 $47.4 $5.5 12% -2% 26%
Median -13% 14% -4% 26%
Total $352.5 $424.4 -$71.9 -17% $398.6 $353.4 $45.2 13% -12% 20%
20 December 2020 7
Still, what struck us Friday was the surge in the CRE loss rate in the most recent exam
relative to prior ones. However, we believe in the stress test the Fed assumes for loans
under deferral programs defaulted, potentially overstating loan losses. Of note, since the
2Q20 ‘as of’ dates, deferral have declined. Furthermore, the vast majority of loans that were
under deferral programs are now performing. Figure 10 examines the net charge-off ratios
used in each CCAR exam over the years for the severely adverse scenario.
FIGURE 10
Stress Test Net Charge-offs Ratios Over the Years
Loan Loss Ratios Total portfolio Loan Loss Ratios Mortgage Loan Loss Ratios HELOCs
7.0 7.0 10.0
9.0
6.5 6.0
8.0
5.0 7.0
6.0
6.0
4.0
5.5 5.0
3.0 4.0
5.0 3.0
2.0
2.0
4.5 1.0 1.0
4.0 - -
2013 2014 2015 2016 2017 2018 2019 2020 2020 2013 2014 2015 2016 2017 2018 2019 2020 2020 2013 2014 2015 2016 2017 2018 2019 2020 2020
Dec Dec Dec
Loan Loss Ratios C&I loans Loan Loss Ratios CRE loans Loan Loss Ratios Credit card
7.5 14.0 24.0
7.0 13.0
22.0
12.0
6.5 11.0 20.0
6.0 10.0 18.0
9.0
5.5 16.0
8.0
5.0 7.0 14.0
6.0
4.5 12.0
5.0
4.0 4.0 10.0
2013 2014 2015 2016 2017 2018 2019 2020 2020 2013 2014 2015 2016 2017 2018 2019 2020 2020 2013 2014 2015 2016 2017 2018 2019 2020 2020
Dec Dec Dec
Loan Loss Ratios Other consumer Loan Loss Ratios Other loans
6.5 5.0
6.0 4.5
4.0
5.5
3.5
5.0 3.0
2.5
4.5
2.0
4.0 1.5
3.5 1.0
0.5
3.0 -
2013 2014 2015 2016 2017 2018 2019 2020 2020 2013 2014 2015 2016 2017 2018 2019 2020 2020
Dec Dec
Fed Governor Brainard

We believe it’s worth pointing out that Fed Governor Lael Brainard was the lone dissent
against the Fed’s decision to modify the restrictions on bank capital distributions on Friday,
preferring more “modest payouts” ahead of an “exceptionally challenging winter.” “Today’s
action nearly doubles the amount of capital permitted to be paid out relative to last
quarter,” she said in a statement. We note Brainard has dissented on several other ‘pro-
banking’ votes in the past several months. This includes also voting against: a) the recent
final guidance regarding living wills; b) modification to the NSFR; c) MS’s purchase of EV;
and d) TD’s purchase of SCHW.
We note there has been discussion of Brainard’s position at the Fed being elevated. We
highlight a November 23 Bloomberg article titled “Biden Allies Ask Brainard to Stay at Fed,
Dimming Treasury Odds” which stated Brainard “may be a leading candidate for Fed chair
when Jerome Powell’s term expires in 2022.” We wonder if banks try to be aggressive as
possible with respect to capital, and perhaps also bank M&A, before this potential
event.
20 December 2020 8
Overview of CCAR, DFAST & SCB

Introduction
The Fed’s annual Comprehensive Capital Analysis and Review (CCAR) is an intensive
assessment of the capital adequacy of the largest banks and the practices that these firms
use to assess their capital needs. CCAR includes the supervisory and company-run stress
tests that are conducted as a part of the Fed’s Dodd-Frank Act stress tests (DFAST), the
sizing of each firm’s stress capital buffer (SCB) requirement, and a qualitative assessment of
firms’ capital plans. The Fed expects banks to be able to continue operating and lending to
households and businesses, even during times of economic and financial market stress. In
early April, the banks submitted their capital plans to the Fed. While the Fed released the
results in June, on schedule (Stress Test 2020: Retake Required, 6/26/20), it said an
additional round of stress tests need to be performed due to the continued uncertainty from
COVID-19.
Coverage Segmented
Only the Category I (BAC, BK, C, GS, JPM, MS, STT, WFC), II (NTRS), and III (COF, PNC, TFC,
USB) banks went through the formal DFAST/CCAR process last year. For 2020, they were
joined by the Category IV (ALLY, CFG, FITB, HBAN, KEY, MTB, RF) banks. Banks with
significant trading activity (BAC, C, GS, JPM, MS and WFC) must consider a global market
shock component, while those with substantial trading or custodial operations (BAC, BK, C,
GS, JPM, MS, STT, WFC) are required to incorporate a counterparty default scenario
component. This construct was also used for December. Note, in our coverage, CMA, FRC,
SIVB and ZION are not part of this formal CCAR exercise.
FIGURE 11
Coverage Segmented
Subject to Subject to Subject to
Subject to Subject to
Category global market counterparty qualitative
CCAR 2019 CCAR 2020
shock default assessment
ALLY IV X
BAC I X X X X X
BK I X X X X
C I X X X X X
CFG IV X
CMA
COF III X X X
FITB IV X
FRC
GS I X X X X X
HBAN IV X
JPM I X X X X X
KEY IV X
MS I X X X X X
MTB IV X
NTRS II X X
PNC III X X X
RF IV X
SIVB
STT I X X X X
TFC III X X X
USB III X X X
WFC I X X X X X
ZION
20 December 2020 9
Stressed Capital Buffer

The SCB, or stressed capital buffer, was integrated into CCAR for the first time this year.
The SCB uses the results from DFAST to determine each firm's capital requirements for the
coming year. The Fed believes by combining its stress tests — which project the capital
needs of each firm under adverse economic conditions — with its non-stress capital
requirements, large banks will now be subject to a single, forward-looking, and risk-
sensitive capital framework. The simplification would result in banks needing to meet 8
capital requirements, instead of 13. A bank’s SCB is calculated as: (1) the difference
between the banks starting and minimum projected CET1 capital ratios under the severely
adverse scenario in the supervisory stress test, plus (2) four quarters of planned common
stock dividends as a percentage of risk-weighted assets. In addition, banks can maintain a
constant level of assets over the planning horizon rather than assuming a growing balance
sheet over the planning horizon like they used to. The SCB requirement could be no less
than 2.5% of RWA. A bank whose capital ratios are at or below its minimum (4.5%) plus its
SCB requirement (above calculation) and any applicable GSIB surcharge (for the biggest
banks, ranges from STT at 1.0% to JPM at 3.5%) plus countercyclical capital buffer (CCyB;
currently 0%), would be subject to automatic restrictions on capital distributions.
The SCBs were finalized in early August. Several of the regional banks (FITB, HBAN, KEY,
MTB, PNC and USB) were at the 7.0% floor, while TFC (7.2%), RF (7.5%) and CFG (7.9%)
came out a little bit higher and publically disagreed with the Fed (which didn’t budge).
Among the Trust Banks, differences at BK (8.5%), STT (8.0%) and NTRS (7.0%) were driven
by the GSIB surcharge. For the consumer finance names, COF (10.1%) was ahead of ALLY
(8.0%). And among the biggest banks, WFC (9.0%), BAC (9.5%), C (10.0%), JPM (11.3%),
MS (13.2%), and GS (13.6%) were all at 9% or higher. Of note, at 3Q20, every bank
exceeded their SCB requirement by at least $2bn, and every bank is expected to accrete
additional capital in 4Q20, based on our forecasts.
With SCB the banks were supposed to have more flexibility managing dividends and share
repurchase starting on Oct 1. Ultimately, we expect the SCB rule to generally remove the
requirement for banks to request prior approval for incremental capital distributions. A
bank will be required to provide the Fed with notice within 15 days after making any capital
distributions in excess of those included in its capital plan. A bank that has resubmitted its
capital plan or received a qualitative objection to its capital plan must continue to request
prior approval of the Fed for incremental capital distributions. A bank may also request
reconsideration of its SCB requirement by submitting a request to the Fed in writing within
15 days of receipt of its SCB requirement, and the Fed is expected to respond in writing
within 30 days. The bank’s request requires an explanation of why it believes that its SCB
requirement should be reconsidered.
In years past, the main focus on capital return has been on payout ratios. Still, with the
advent of CECL (which front loads reserve building in economic downturn) and the
introduction of the SCB, we expect the capital return focus to eventually shift toward capital
above the SCB plus a buffer. We think this will allow most banks to maintain their current
dividend and lead to share repurchase as the economic outlook and loan loss trajectory
becomes clearer.
The SCB includes four quarters of planned common stock dividends (as a percentage of
risk-weighted assets). As a result, if banks fall short (or come too close to their SCB
requirement), they could look to reduce their dividend. Still, it’s important to note even if a
bank breaches its required capital level, it doesn’t necessarily translate into a dividend
reduction. Within two business days of receiving the SCB requirement, a bank is required to
assess whether its planned capital distributions are appropriate assuming its SCB
20 December 2020 10
requirement. A bank is required to notify the Fed of any reductions in capital distributions
in its capital plan.
Automatic Restrictions on Capital Distributions

If a bank’s capital ratios fall below its requirements, the maximum amount of capital
distributions and discretionary bonus payments it can make becomes a function of its
eligible retained income. Eligible retained income is now defined as the greater of (1) net
income for the four preceding calendar quarters, net of any distributions and associated tax
effects not already reflected in net income, and (2) the average of a bank’s net income over
the preceding four quarters (#2 was added earlier this year). There is a sliding scale:
 No payout ratio limitation applies – Greater than 2.5% plus 100% of CCyB and 100%
of GSIB surcharge (or 10.5% in JPM’s case)
 60% max payout – Less than or equal to 2.5% plus 100% of CCyB and 100% surcharge,
and greater than 1.875% plus 75% of the CCyB and 75% of the GSIB surcharge (or
below 10.5% but above 9.625% at JPM)
 40% max payout – Less than or equal to 1.875% plus 75% of CCyB and 75% of GSIB
surcharge, and greater than 1.25% plus 50% of CCyB amount and 50% of GSIB
surcharge
 20% max payout – Less than or equal to 1.25% plus 50% of CCyB and 50% of GSIB
surcharge, and greater than 0.625% plus 25% of CCyB and 25% of GSIB surcharge
 0% no payout – Less than or equal to 0.625% plus 25% of the CCyB amount and 25%
of GSIB surcharge
Accounting Adjustments
Beginning with CCAR 2020, all banks are required to incorporate CECL into their stressed
projections. However, the Fed will maintain its prior modeling framework for the
supervisory stress tests as it relates to CECL through the 2021 cycle. In addition, the Fed
will not issue supervisory findings on banks' stressed estimates of allowances under CECL.
The FASB has also made revisions to accounting standards associated with the recognition
and measurement of financial instruments, revenue recognition, leases, credit losses, and
derivatives and hedging. The effective dates for these standards range from fiscal years
beginning after Dec 15, 2017 to fiscal years beginning after Dec 15, 2020. For CCAR 2020,
banks, generally speaking, will not reflect the adoption of new accounting standards unless
it has already been adopted.
Supervisory Scenarios
In mid-September, the Fed released three supervisory scenarios — baseline, severely
adverse, and alternative severe — that it used to conduct its updated stress analyses. It
also detailed its global market shock component and the counterparty default
component. The scenarios start in 3Q20 and extend through 3Q23.
20 December 2020 11
FIGURE 12
Comparing Annual Scenarios
SCAP 2009 CCAR 2012 CCAR 2013 CCAR 2014 CCAR 2015
Year 1 Year 2 Year 1 Year 2 Year 1 Year 2 Year 1 Year 2 Year 1 Year 2
Tested Scenario: "More Adverse" "Stress" "Severely Adverse" "Severely Adverse" "Severely Adverse"
Real GDP Growth -3.3% 0.5% -3.9% 2.2% -4.0% 2.2% -4.0% 3.0% -1.5% 3.0%
Unemployment Rate 8.9% 10.3% 11.7% 12.9% 11.0% 12.0% 10.7% 11.2% 9.9% 9.9%
House Prices -22.0% -7.0% -11.9% -8.9% -11.9% -8.9% -12.4% -13.5% -14.9% -11.0%
Baseline Scenario:
Real GDP Growth -2.0% 2.1% 2.3% 2.8% 2.3% 3.0% 2.9% 2.9% 2.9% 2.9%
Unemployment Rate 8.4% 9.0% 9.0% 8.4% 7.8% 7.4% 6.9% 6.4% 5.6% 5.3%
House Prices -14.0% -4.0% 1.0% 1.0% 2.5% 3.0% 2.5% 2.9% 2.5% 2.9%
CCAR 2016 CCAR 2017 CCAR 2018 CCAR 2019

Year 1 Year 2 Year 1 Year 2 Year 1 Year 2 Year 1 Year 2
Tested Scenario: "Severely Adverse" "Severely Adverse" "Severely Adverse" "Severely Adverse"
Real GDP Growth -4.2% 3.0% -5.1% 3.0% -4.7% 2.8% -5.0% -2.9%
Unemployment Rate 9.1% 9.9% 8.9% 9.9% 8.5% 9.9% 8.4% 9.9%
House Prices -12.2% -12.4% -11.8% -14.7% -22.5% -9.7% -13.2% -14.6%
Baseline Scenario:
Real GDP Growth 2.5% 2.3% 2.3% 2.3% 2.5% 2.0% 2.0% 1.6%
Unemployment Rate 4.6% 4.5% 4.5% 4.4% 3.8% 3.7% 3.6% 3.8%
House Prices 2.4% 2.5% 2.5% 2.5% 2.5% 2.6% 2.4% 2.9%
CCAR 2020 Feb CCAR 2020 2.0

Year 1 Year 2 Year 1 Year 2 Year 1 Year 2
"Severely "Alternative
Tested Scenario: "Severely Adverse"
Adverse" Severe"
Real GDP Growth -5.3% 2.9% -0.2% 10.8% 2.1% 4.2%
Unemployment Rate 8.4% 9.9% 12.2% 10.2% 11.0% 10.3%
House Prices -14.2% -15.4% -17.3% -11.5% -15.9% -13.0%
Baseline Scenario:
Real GDP Growth 1.9% 2.0% 4.1% 2.8% 4.1% 2.8%
Unemployment Rate 3.7% 3.8% 7.0% 5.8% 7.0% 5.8%
House Prices 2.4% 2.3% 3.7% 4.0% 3.7% 4.0%
Baseline Scenario
The baseline outlook for U.S. real activity, inflation, and interest rates is similar to the Sept
2020 consensus projections from Blue Chip Economic Indicators. The baseline scenario for
the U.S. is a sharp increase in economic activity in 2H20, followed by continued but more
moderate improvement in economic conditions over the remainder of the 13-quarter stress
test period. Real GDP growth rises sharply at an annualized rate of 14% in 2H20, then
gradually declines to about 2½% in 2023. The unemployment rate declines throughout the
scenario period, falling to almost 8¾% by the end of 2020 and to about 5¼% in the 3Q23,
the end of the scenario period. Annualized quarterly headline CPI inflation is 3¾% in 3Q20
but drops thereafter and is relatively steady over the rest of the scenario period, ranging
from 2 to 2¼%.
Accompanying the economic recovery, short-term Treasury rates are assumed to remain
near 0% through the end of 2021, and then to gradually rise to slightly above 1% by the end
of the stress test period. Longer-dated Treasury yields are assumed to rise slightly over the
scenario period, consistent with some steepening of the yield curve. Yields on 10-year
Treasury securities rise from about 0.75% in late 2020 to about 2%. The prime rate moves
in line with short-term Treasury rates, while corporate bond yields rise in line with long-
term Treasury yields. Mortgage rates fall to 2¾% at the end of 2020, remain near that level
through 2021, and then rise gradually and in line with long-term Treasury yields, reaching
3½% at the end of the scenario period.
Equity prices rise ¾% from the 3Q20 to 4Q20 and about 3½% per year in 2021 and 2022.
Equity prices are up more than 10¾% by the end of the scenario period. The VIX averages
31¼ in 2H20 and then remains near 26 for the remainder of the scenario period. House
prices rise at an annualized rate of about 3½% from the 3Q20 to 4Q20; thereafter, house
price appreciation gradually increases to an annualized rate of 4% for the last three quarters
20 December 2020 12
of the scenario period. CRE prices decline 10% through 3Q21 and then rise 7¾% through
the end of the scenario period.
The baseline paths for the international variables are similar to the trajectories reported in
the Sept 2020 Blue Chip Economic Indicators. After strong growth 3Q20, the baseline
scenario features a relatively steady expansion in international economic activity, albeit at a
different pace across the four country blocs: Over the entire scenario period, annualized real
GDP growth averages 6% in developing Asia, 6¾% in the euro area, 4% in Japan, and
10½% in the UK.
Severely Adverse Scenario

The severely adverse scenario can be characterized by a severe decline in global economic
activity accompanied by financial market distress. Under the severely adverse scenario, the
U.S. unemployment rate climbs to a peak of 12½% in 4Q21, a 3%age point increase relative
to the initial level, the level in 3Q20. In line with the increase in the unemployment rate, real
GDP falls 3¼% from 3Q20 to its trough in 4Q21. The decline in activity is accompanied by a
lower headline CPI inflation rate, which quickly falls to an annual rate of about 1¼% in
4Q20, and then ranges from 1¼% to about 2¼% in the remaining quarters. In the later
quarters of the scenario, the unemployment rate declines at a pace comparable with the
paths of severely adverse scenarios used in previous stress testing cycles. Over the scenario
period, despite the reduction in the unemployment rate, the level of real GDP does not r rise
above the level in the baseline scenario.
In line with the severe decline in real activity, the interest rate for 3-month Treasury bills
remains near 0% throughout the scenario period. The 10-year Treasury yield rises gradually
from about 0.25% during 4Q20 to about 1.50% by the end of the scenario period. The
result is a steepening of the yield curve over the scenario period.
Financial conditions in corporate and real estate lending markets are stressed significantly.
The spread between yields on investment-grade corporate bonds and yields on long-term
Treasury securities widens to almost 5.75% before narrowing to about 1.75% at the end of
the scenario period. The spread between mortgage rates and 10-year Treasury yields
widens to about 3.50% points early in 2021 before gradually falling to about 1.75% points
by the end of the scenario.
Asset prices drop sharply in this scenario. Equity prices decline more than 30% from 3Q20
to 4Q20, as the economy contract sharply, and the VIX rises to a peak level of 70. Equity
prices continue to fall in the first half of 2021 before gradually recovering, leaving them
down about 23% for the year. They continue to recover but close the scenario period down
about 4.75% from their value in the initial quarter. House prices and CRE prices also
experience large declines. House prices fall about 26.75% from 3Q20 to the 3Q22; from that
trough, they rise about 4.25% during the rest of the scenario period. CRE prices decline 30%
from 3Q20 to 4Q22 and stay close to that level for the remainder of the scenario period.
The international component of this scenario features sharp slowdowns in all developed
country blocs, leading to recessions in the euro area, the UK, and Japan. Developing Asia has
only a mild slowdown in economic activity in the scenario. With the continued weakness in
economic activity, all of the foreign economies included in the scenario experience sizable
declines in their inflation rates during the scenario period. The U.S. dollar appreciates
against the euro, the pound sterling, and the currencies of developing Asia, but depreciates
slightly against the yen, reflecting flight-to-safety capital flows.
Additional Key Features of the Severely Adverse Scenario

Stresses in the corporate loan market should be assumed to be more intense for lower-
rated firms. Declines in aggregate U.S. residential and CRE prices should be assumed to be
20 December 2020 13
concentrated in regions that have experienced rapid price gains over the past two years.
Declines in prices of U.S. housing and commercial real estate should also be assumed to be
representative of risks to house prices and commercial real estate prices in foreign regions
and economies that have experienced rapid price gains over the past two years. Moreover,
conditions across Latin American economies should be assumed to be comparable to the
sharp slowdown in the U.S.
Comparison to Feb 2020 Severely Adverse Scenario

The severely adverse scenario features a smaller increase in the unemployment rate in the
U.S. compared with the February 2020 severely adverse scenario. However, the current
severely adverse scenario starts from a significantly higher unemployment rate, reflecting
current economic conditions. The smaller increase in the unemployment rate reflects the
Scenario Design Framework, which calls for a smaller increase in the unemployment rate
when the unemployment rate is already elevated. The consensus forecast from Blue Chip
Economic Indicators has an unemployment rate of 9.5% 3Q20. Given the weak initial
economic conditions, the Scenario Design Framework calls for a 3%age point increase in
the unemployment rate. Accordingly, the unemployment rate in the current scenario
reaches a peak of 12.5%. Interest rates rise in the current scenario, given their low starting
values, whereas they fell in the Feb 2020 scenario. Asset price declines are comparable with
the declines in the Feb scenario.
Alternative Severe Scenario

This alternative scenario is consistent with a number of adverse events, including a series of
second waves of the COVID-19 event that are not synchronized across different regions of
the U.S. and the rest of the world, and related structural changes in labor markets.
Accordingly, the alternative severe scenario is characterized by a less-severe initial drop in
global economic activity relative to the severely adverse scenario, and a subsequent
recovery that is more sluggish. Financial market stress is comparable with the stress
assumed in the severely adverse scenario.
Under the alternative severe scenario, the U.S. unemployment rate climbs to a peak of about
11% in 4Q20. This 1.5% increase in the unemployment rate departs from the Scenario
Design Framework, which would call for the unemployment rate to rise at least 3.0% and to
peak between the sixth and the eighth quarter of the scenario. The unemployment rate
stays at its 11% peak through 4Q21. By that quarter, the unemployment rate is about 4.5%
higher than in the baseline scenario, but 1.5% lower than in the severely adverse scenario.
However, by the end of the scenario period, the relationship with the severely adverse
scenario is reversed: The unemployment rate in the alternative severe scenario is 9% in the
3Q23, about 1.5% higher than in the severely adverse scenario.
In line with the increase in the unemployment rate, real GDP falls at an annualized rate of
9.0% in 4Q20 and then rises about 2.0% in 2021. Real GDP growth picks up over the
remainder of the scenario period. The decline in activity is accompanied by a lower headline
CPI inflation rate, which quickly falls to an annual rate of about 1.0% in 4Q20, and then is
relatively steady over the rest of the 13-quarter period, ranging from 1.75% to 2.25%.
In line with the prolonged weakness in real activity, the interest rate for 3-month Treasury
bills remains near zero throughout the scenario, which is identical to the path assumed in
the severely adverse scenario. The 10-year Treasury yield rises gradually from 0.25% during
3Q20 to 1.75% by the end of the scenario period. The result is a slightly greater steepening
of the yield curve over the scenario period than in the severely adverse scenario.
Financial conditions in corporate and real estate lending markets are stressed significantly.
The spread between yields on investment-grade corporate bonds and yields on long-term
Treasury securities widens gradually to about 5.75% in 3Q21, before falling to 2.75% at the
20 December 2020 14
end of the scenario period, an increase of 1%age point relative to 3Q20 and 0.75% higher
than assumed in the severely adverse scenario. The spread between mortgage rates and 10-
year Treasury yields widens to about 3.25% in 4Q20; it remains near this level through the
4Q21 before gradually declining, and reaches 2.0% at the end of the scenario period. This
end point is 0.25% higher than in the severely adverse scenario, reflecting the persistently
weaker level of activity assumed in this alternative scenario.
Asset prices drop sharply in this scenario. Equity prices remain depressed longer than in the
severely adverse scenario, bottoming out at the end, rather than the middle, of 2021. They
fall about 16.25% from 3Q20 to 4Q20 as the economy contracts; this decline in equity
prices is accompanied by a rise in the VIX, which reaches a peak of 70. Equity prices
continue to fall through 2021, and at the end of 2021 are almost 50% lower than 3Q20.
They recover through the rest of the scenario period and end the scenario down about
13.5% from 3Q20. The VIX gradually decreases to 28 by the end of the scenario period.
House prices and CRE prices also experience large overall declines. House prices fall 27%
through 4Q22 and recover 3.75% through the rest of the scenario period, a path of house
prices similar to the path in the severely adverse scenario. CRE prices decline 30% through
the end of 2022 and stay close to that level for the remainder of the scenario, a path that
matches the one in the severely adverse scenario.
In line with domestic developments, the international component of this scenario features a
less-severe initial contraction in global economic activity than in the severely adverse
scenario, but a less-robust recovery thereafter. With the continued weakness in economic
activity, all of the foreign economies included in the scenario experience sizable declines in
their inflation rates during the scenario period. As in the severely adverse scenario, the U.S.
dollar initially appreciates against the euro, the pound sterling, and the currencies of
developing Asia, but depreciates slightly against the yen, consistent with flight-to-safety
capital flows.
Additional Key Features of the Alternative Severe Scenario

Stresses in the corporate loan market should be assumed to be more intense for lower-
rated firms. Declines in aggregate U.S. residential and commercial real estate prices should
be assumed to be concentrated in regions that have experienced rapid price gains over the
past two years. Declines in prices of U.S. housing and commercial real estate should also be
assumed to be representative of risks to house prices and commercial real estate prices in
foreign regions and economies that have experienced rapid price gains over the past two
years. Moreover, conditions across Latin American economies should be assumed to be
comparable to the sharp slowdown in the U.S.
Comparison to June 2020 Alternative Downside Scenarios

In June the Fed used several scenarios for additional sensitivity analysis to explore
vulnerabilities of banks related to the COVID-19 event. The sources of stress considered in
the alternative severe scenario are comparable to those for the W- and U-shaped scenarios
for the sensitivity analysis released in June, albeit the rise in the unemployment rate
envisaged in the new scenario is smaller but more persistent. These changes in the peak of
the unemployment rate in the alternative severe scenario are in line with revisions to the
forecasts of professional forecasters. Data released for the end of 2Q20 and the first part of
3Q20 have generally led professional forecasters to revise downward the level of the
unemployment rate expected to prevail during the remainder of 2020 and have significantly
compressed the range of forecasts.

The Feb 2020 severely adverse scenario was designed and published before the onset of the
COVID-19 event. The alternative severe scenario features a smaller increase in the
unemployment rate in the U.S. compared with the Feb 2020 severely adverse scenario.
20 December 2020 15
However, the alternative severe scenario starts from a significantly higher unemployment
rate, reflecting current economic conditions. The relatively smaller increase in the
unemployment rate departs from the Scenario Design Framework, which would call for the
unemployment rate to rise at least 3%age points and to peak between the sixth and the
eighth quarter of the scenario. Moreover, the unemployment rate remains near its peak for
a greater number of periods. On the financial side, asset price declines are broadly
consistent with those in the Feb scenario.
Global Market Shock Component

The global market shock is a set of hypothetical shocks to a large set of risk factors
reflecting general market distress and heightened uncertainty. Firms with significant trading
activity (BAC, C, GS, JPM, MS, WFC) must consider the global market shock as part of the
supervisory severely adverse and alternative severe scenarios, and recognize associated
losses in the first quarter of the planning period (3Q20, in this case). In addition, certain
large and highly interconnected firms must apply the same global market shock when
projecting losses under the counterparty default scenario component. The global market
shock is applied to asset positions held by the firms on a given as-of date. The as-of date for
the global market shock is June 30.
Both the severely adverse and alternative severe scenarios include the same global market
shock component, which incorporates widespread corporate defaults, ratings downgrades,
severe declines in equity values, and increases in equity-implied volatility resulting from a
worsening recession. Spreads widen sharply for non-investment grade and lower-rated
investment grade bonds as ratings sensitive investors anticipate further downgrades and
sell assets. Similarly, the leveraged loan market comes under considerable pressure from
decreased demand. Open-ended mutual funds and ETFs that hold leveraged loans and
high-yield bonds face heavy redemptions. Due to liquidity mismatches, mutual fund and
ETF managers sell their most-liquid holdings, leading to more extensive declines in the
prices of fixed-income securities and other related assets. Price declines on leveraged loans
flow through to the prices for CLOs. CLO prices suffer severe corrections associated with
the devaluation of the underlying collateral and selling by concentrated holders desiring to
reduce risk.
The broad selloff of corporate bonds and leveraged loans spills over to prices for other risky
credit and private equity instruments. Credit spreads for emerging market corporate credit
and sovereign bonds widen due to a fall in risk appetite and flight-to-safety considerations.
Asset values for private equity experience sizable declines as leveraged firms face lower
earnings and a weak economic outlook. Municipal bond spreads widen in line with lower
municipal tax revenues associated with the severe weakening of the U.S. economy.
Given the current low level of short-term interest rates, short-term Treasury rates fall only
slightly in this scenario. Longer-term Treasury rates fall as a result of flight-to-safety flows,
but by a modest amount given the already-low interest rate environment. Short-term U.S.
interbank lending rates rise as firms face increased funding pressure from a pullback in
overnight lending, while longer-term swap rates fall in line with the declines in long-term
Treasury rates.
Flight-to-safety considerations cause the U.S. dollar to appreciate somewhat against the
currencies of most advanced economies, with the Japanese yen a notable exception. The
yen appreciates against the U.S. dollar as investors view the yen as a safe-haven currency.
Flight-to-safety considerations cause precious metals to experience an increase in value
while non-precious metals prices fall as a result of lower demand that in turn results from
global economic weakness.
20 December 2020 16

The global market shock component is broadly consistent with the Feb 2020 severely
adverse scenario as both emphasize a heightened stress to highly leveraged markets that
causes CLOs and private equity investments to experience large market value declines.
Moreover, there is a general rise in short-term interbank lending rates, highlighting a severe
increase in funding pressures. A key difference is a milder decline in Treasury rates, which
reflects that policy rates are now closer to zero. Shocks to equity values and short-term
equity implied volatility are substantially larger. Energy price declines and related volatility
increases are more pronounced, in general. The Swiss franc depreciates instead of
appreciates against the U.S. dollar. Finally, stresses in the municipal bond market are more
severe.
Comparison to June 2020 Alternative Downside Scenarios

The global market shock component reflects themes similar to those highlighted in the June
2020 alternative downside scenarios. Key differences include a milder decline in Treasury
rates, which reflects that policy rates are now closer to zero. Sovereign credit spreads widen
less severely, particularly in the European periphery. In addition, changes to agency option-
adjusted spreads are more modest given the increase in spread levels since the as-of-date
of the June 2020 alternative downside scenarios.
Counterparty Default Component

Banks with substantial trading (BAC, C, GS, JPM, MS, WFC) or custodial (BK, STT) operations
will be required to incorporate a counterparty default scenario component into their
supervisory severely adverse and alternative severe stress scenarios. The counterparty
default scenario component involves the instantaneous and unexpected default of the
firm’s largest counterparty. These banks will be required to estimate and report the
potential losses and related effects on capital associated with the instantaneous and
unexpected default of the counterparty that would generate the largest losses across their
derivatives and securities financing activities, including securities lending and repurchase or
reverse repurchase agreement activities. The counterparty default scenario component is an
add-on to the macroeconomic conditions and financial market environments specified in
the supervisory severely adverse and alternative severe scenarios. The largest counterparty
of each firm will be determined by net stressed losses. Net stressed losses are estimated by
applying the global market shock to revalue non-cash securities financing transactions
(securities or collateral posted or received); and, for derivatives, the trade position and non-
cash collateral exchanged. The as-of date for the counterparty default scenario component
is also June 30.
20 December 2020 17
FIGURE 13 FIGURE 14
U.S. Real GDP Growth – CCAR 2020 2.0 Scenarios U.S. Unemployment Rate – CCAR 2020 2.0 Scenarios
30 % 14 %
20 % 12 %
10 %
10 %
0%
8%
-10 %
6%
-20 %
-30 % 4%
-40 % 2%
1Q01 1Q04 1Q07 1Q10 1Q13 1Q16 1Q19 1Q22 1Q01 1Q04 1Q07 1Q10 1Q13 1Q16 1Q19 1Q22
2020.2 Baseline 2020.2 Severely Adverse 2020.2 Baseline 2020.2 Severely Adverse
2020.2 Alternative 2020.2 Alternative
Source: Barclays Research and Federal Reserve Source: Barclays Research and Federal Reserve
FIGURE 15 FIGURE 16
U.S. House Price Index – CCAR 2020 2.0 Scenarios Implied 10-year/3-month Spread – CCAR 2020 2.0 Scenarios
240 bps
400
220 350
300
200
250
180 200
160 150
100
140
50
120 0
100 -50
1Q01 1Q04 1Q07 1Q10 1Q13 1Q16 1Q19 1Q22 1Q01 1Q04 1Q07 1Q10 1Q13 1Q16 1Q19 1Q22
2020.2 Baseline 2020.2 Severely Adverse 2020.2 Baseline 2020.2 Severely Adverse
2020.2 Alternative 2020.2 Alternative
Source: Barclays Research and Federal Reserve Source: Barclays Research and Federal Reserve
FIGURE 17
U.S. Real GDP Growth – Comparing CCARs
30 %
20 %
10 %
0%
-10 %
-20 %
-30 %
-40 %
1Q01 1Q03 1Q05 1Q07 1Q09 1Q11 1Q13 1Q15 1Q17 1Q19 1Q21 1Q23
2020.2 Baseline 2020.2 Severely Adverse 2020.2 Alternative 2020.1 Severely Adverse
2019 Severely Adverse 2018 Severely Adverse 2017 Severely Adverse 2016 Severely Adverse
2015 Severely Adverse 2014 Severely Adverse 2013 Severely Adverse 2012 Stress Scenario
20 December 2020 18
FIGURE 18
U.S. Unemployment Rate – Comparing CCARs
14 %
12 %
10 %
8%
6%
4%
2%
1Q01 1Q03 1Q05 1Q07 1Q09 1Q11 1Q13 1Q15 1Q17 1Q19 1Q21 1Q23
FIGURE 19
U.S. House Price Index – Comparing CCARs
280
260
240
220
200
180
160
140
120
100
1Q01 1Q03 1Q05 1Q07 1Q09 1Q11 1Q13 1Q15 1Q17 1Q19 1Q21 1Q23
FIGURE 20
Implied 10-year/3-month Spread – Comparing CCARs
bps
400
300
200
100
-100
1Q01 1Q03 1Q05 1Q07 1Q09 1Q11 1Q13 1Q15 1Q17 1Q19 1Q21 1Q23
20 December 2020 19
ANALYST(S) CERTIFICATION(S):
I, Jason M. Goldberg, CFA, hereby certify (1) that the views expressed in this research report accurately reflect my personal views about any or all
of the subject securities or issuers referred to in this research report and (2) no part of my compensation was, is or will be directly or indirectly
related to the specific recommendations or views expressed in this research report.
IMPORTANT DISCLOSURES
Barclays Research is produced by the Investment Bank of Barclays Bank PLC and its affiliates (collectively and each individually, "Barclays"). All
authors contributing to this research report are Research Analysts unless otherwise indicated. The publication date at the top of the report
reflects the local time where the report was produced and may differ from the release date provided in GMT.
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The analysts responsible for preparing this research report have received compensation based upon various factors including the firm's total
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potential interest of the firm's investing clients in research with respect to the asset class covered by the analyst.
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Materially Mentioned Stocks (Ticker, Date, Price)
Bank of America (BAC, 18-Dec-2020, USD 28.67), Overweight/Positive, CD/CE/D/GE/J/K/L/M/N
Capital One Financial (COF, 18-Dec-2020, USD 91.57), Overweight/Positive, A/CD/CE/D/I/J/K/L/M/N
Citigroup Inc. (C, 18-Dec-2020, USD 59.06), Overweight/Positive, A/CD/CE/D/E/GE/I/J/K/L/M/N
Citizens Financial Group Inc. (CFG, 18-Dec-2020, USD 34.21), Overweight/Positive, A/CD/CE/D/I/J/K/L/M
Fifth Third Bancorp (FITB, 18-Dec-2020, USD 26.63), Overweight/Positive, CD/CE/J/K/M/N
Goldman Sachs Group Inc. (GS, 18-Dec-2020, USD 242.13), Equal Weight/Positive, A/CD/CE/E/I/J/K/L/M/N
Huntington Bancshares (HBAN, 18-Dec-2020, USD 12.39), Equal Weight/Positive, CD/CE/J/K/M/N
JPMorgan Chase & Co. (JPM, 18-Dec-2020, USD 119.08), Overweight/Positive, A/CD/CE/D/GE/I/J/K/L/M/N/S
KeyCorp (KEY, 18-Dec-2020, USD 15.42), Underweight/Positive, CD/CE/J/K/M/N
M&T Bank (MTB, 18-Dec-2020, USD 123.73), Overweight/Positive, CD/J/K/M/N
Morgan Stanley (MS, 18-Dec-2020, USD 64.18), Equal Weight/Positive, A/CD/CE/D/I/J/K/L/M/N
Northern Trust (NTRS, 18-Dec-2020, USD 91.90), Equal Weight/Positive, A/CD/CE/D/J/K/L/M/N
PNC Financial Services Gp (PNC, 18-Dec-2020, USD 144.91), Equal Weight/Positive, CD/CE/D/J/K/L/M/N
Regions Financial (RF, 18-Dec-2020, USD 15.26), Underweight/Positive, A/CD/CE/D/I/J/K/L/M/N
State Street (STT, 18-Dec-2020, USD 70.66), Overweight/Positive, A/CD/CE/D/J/K/L/M/N
The Bank of New York Mellon Corp. (BK, 18-Dec-2020, USD 40.79), Overweight/Positive, A/CD/CE/D/I/J/K/L/M/N
Truist Financial Corp. (TFC, 18-Dec-2020, USD 45.90), Equal Weight/Positive, CD/CE/J/K/M/N
U.S. Bancorp (USB, 18-Dec-2020, USD 44.86), Overweight/Positive, A/CD/CE/D/E/I/J/K/L/M/N
Wells Fargo (WFC, 18-Dec-2020, USD 29.01), Equal Weight/Positive, A/CD/CE/D/E/I/J/K/L/M/N
Unless otherwise indicated, prices are sourced from Bloomberg and reflect the closing price in the relevant trading market, which may not be the
last available price at the time of publication.
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previous 12 months.
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CD: Barclays Bank PLC and/or an affiliate is a market-maker in debt securities issued by this issuer.
20 December 2020 20
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Risk Disclosure(s)
Master limited partnerships (MLPs) are pass-through entities structured as publicly listed partnerships. For tax purposes, distributions to MLP
unit holders may be treated as a return of principal. Investors should consult their own tax advisors before investing in MLP units.
Guide to the Barclays Fundamental Equity Research Rating System:
Our coverage analysts use a relative rating system in which they rate stocks as Overweight, Equal Weight or Underweight (see definitions below)
relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industry (the "industry coverage
universe").
In addition to the stock rating, we provide industry views which rate the outlook for the industry coverage universe as Positive, Neutral or
Negative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investors
should carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings alone.
Stock Rating
Overweight - The stock is expected to outperform the unweighted expected total return of the industry coverage universe over a 12-month
investment horizon.
Equal Weight - The stock is expected to perform in line with the unweighted expected total return of the industry coverage universe over a 12-
month investment horizon.
20 December 2020 21
Underweight - The stock is expected to underperform the unweighted expected total return of the industry coverage universe over a 12-month
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Industry View
Positive - industry coverage universe fundamentals/valuations are improving.
Neutral - industry coverage universe fundamentals/valuations are steady, neither improving nor deteriorating.
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Below is the list of companies that constitute the "industry coverage universe":
Ally Financial Inc. (ALLY) Amalgamated Bank (AMAL) Atlantic Union Bankshares (AUB)
Bank of America (BAC) Capital One Financial (COF) Citigroup Inc. (C)
Citizens Financial Group Inc. (CFG) Comerica Inc. (CMA) Fifth Third Bancorp (FITB)
First Republic Bank (FRC) Goldman Sachs Group Inc. (GS) Huntington Bancshares (HBAN)
JPMorgan Chase & Co. (JPM) KeyCorp (KEY) M&T Bank (MTB)
Morgan Stanley (MS) Northern Trust (NTRS) PNC Financial Services Gp (PNC)
Regions Financial (RF) Silvergate Capital Corp. (SI) State Street (STT)
SVB Financial Group (SIVB) The Bank of New York Mellon Corp. (BK) Truist Financial Corp. (TFC)
U.S. Bancorp (USB) Wells Fargo (WFC) Zions Bancorporation (ZION)
Distribution of Ratings:
Barclays Equity Research has 1649 companies under coverage.
47% have been assigned an Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 50% of
companies with this rating are investment banking clients of the Firm; 73% of the issuers with this rating have received financial services from the
Firm.
36% have been assigned an Equal Weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating; 43% of
Firm.
14% have been assigned an Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 33% of
Firm.
Guide to the Barclays Research Price Target:
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CORE

U.S. Large-Cap Banks

Can Resume but Payout Ratio Capped

Near-term Capital Return

Source: Barclays Research and Bloomberg

GSIB Company Comments

 GS: Intends to resume share repurchases in 1Q21.

Non-GSIB Company Comments

 No other Super Regional bank commented publicly.

Stressed Capital Buffer & Excess Capital

Source: Barclays Research, Company reports and Federal Reserve

Source: Barclays Research and Federal Reserve

Min Stress 4Q20 3Q20 Excess/ Internal Excess/

Stress Test Results

Severely adverse Alternative severe Minimum Requirement

Source: Barclays Research and Federal Reserve

Loan Loss Analysis

1Q20 2Q20 3Q to 1Q20 3Q20 ACL/ Sev- ACL/ Alterna ACL/

* Does not incorporate $2.7bn unamortized loan mark.

Source: Barclays Research and Federal Reserve

Source: Barclays Research and Federal Reserve

Fed Governor Brainard

Overview of CCAR, DFAST & SCB

Source: Barclays Research and Federal Reserve

Stressed Capital Buffer

Automatic Restrictions on Capital Distributions

CCAR 2016 CCAR 2017 CCAR 2018 CCAR 2019

CCAR 2020 Feb CCAR 2020 2.0

Severely Adverse Scenario

Additional Key Features of the Severely Adverse Scenario

Comparison to Feb 2020 Severely Adverse Scenario

Alternative Severe Scenario

Additional Key Features of the Alternative Severe Scenario

Comparison to June 2020 Alternative Downside Scenarios

Comparison to Feb 2020 Severely Adverse Scenario

Global Market Shock Component

Comparison to Feb 2020 Severely Adverse Scenario

Comparison to June 2020 Alternative Downside Scenarios

Counterparty Default Component

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