Ramerci, i wasnt trying to raise your heckles but throw some coals onto a spirited topic that certainly raised the temperature. For me, I believe that the SP has factored into a positive stress test result and onwards/upwards will be from hard results released by the bank.
Yes it's priced in for sure. Having said that once they are out of the way it should still add a bit of a stimulus to the price. The test results will be made public so investors will be able to see the strength of the banks assets. It should also be clear where we stand as regards the banks reserves. These tests are along time coming and while I'm sure some will question how thorough they are it will still remove an unknown from the road, even if its a known unknown.
The term "factored in" is one that in my opinion is too often misused and abused. To think that the stress tests are already factored in is only an opinion of course, but in my opinion the idea that Bank X or Bank Y already has positive attributes already accounted for is unreasonable. A particular bank I know, let's call it Bank of Irr for convenience sake (not to spread any rumours) operates in a country as one of the so called pillar banks. The same bank is recovering from the effects of a recent recession in Irr. One cause of the recent recession was a property price collapse. It devastated property prices and had a huge affect on financial markets among other things. As a direct result of steps taken by the Irrish government to stop Irrish banks defaulting, massive debts were undertaken from European Central. Now six years later and things have started to turn around for the bank. It is back in profit. It has established a lucrative secondary presence in the UK post office system, property prices are recovering (although this is more noticeable in urban centres) and the bank of Irr is expected to have adequate finances to pass the stress test. In other words the bank of irr is now operating in an area of growth with growing employment and positive economic statistics. If someone was to say to me do you think that the bank of Irr has the stress test results factored in to its share price? I would have to say no. I believe the bank has made more severe provisions than necessary and understated its positive figures (accounting magic) to appear more favourable in the light of the stress audit. I think that once the stress tests are over the bank will accelerate and broaden its lending program, will post very positive full year results, will show better than expected results for its UK business and will finally have an accurate idea of market capitalisation which I believe will be around 13-15Bn if you include UK business (which is a difficult area to put a price on because of the rolling contractual nature of the agreement with UK post office).
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