No Longer a Distant Dream (NYSE: PNC) (NYSE: JPM) (NYSE: WFC)

NEW YORK - Banks are back!, as the U.S. Government has announced the results of the "stress test" for 19 most economically important U.S. financial institutions.

[To see the full PNC report click here

To see the full PNC report PDF version click here]

PNC Financial, received a clean bill of health and plans to raise its dividend in the second quarter of 2011. While, PNC has the second strongest capital ratio behind Comerica Bank, due to weird Basel III rules, the company has less capital under Basel than it reports. Basel only counts 10% of a banks investment in another bank's stock as capital. Therefore only $2.5 billion of the PNC's $5 billion (on the books) investment in BlackRock counts towards capital. This treatment by Basel will likely be hotly contested by banks going forward. Despite this PNC still has one of the strongest Basel III capital ratios.

Wells Fargo announced a dividend raise to 12 cents giving the company a 1.5% yield. There has been speculation surrounding the company since its CFO Howard Atkins left in February.

J.P. Morgan announced that they have raised their dividend to 25 cents a share, giving the company a 2.1% yield.

U.S. Bancorp announced that they have increased their dividend to 12.5 cents giving the company a 1.85% yield.

BB&T said that they raised their dividend by 1 cent. BB&T was one of the few companies to pay a dividend above 10 cents during the financial crisis. However the company has struggled as of late and the company was only able to raise their dividend by a token 1 cent.

Bank of New York Mellon, which has the highest of quality loans among all banks, indicated today that it will raise its dividend but it did not say by how much.

M&T Bank is not expected to increase its dividend due to its already large payout as a percent of earnings. M&T was the only bank to not decrease its dividend since 2007. Though, Hudson City Bancorp has also accomplished this feat, it is expected that they will decrease their dividend this year, as the bank has been hit by problems.

Goldman Sachs and Morgan Stanley have not announced anything yet regarding their dividend. It is speculated that BAC and Citigroup will not raise their dividends until the second half of 2011.

Suntrust Banks announced it will issue $1 billion in stock and it plans to use the proceeds to buy back TARP. A dividend raise is not likely imminent for the company.

KeyCorp has still not repaid TARP, meaning dividends are likely not to occur until the second half of 2011.

Fifth Third Bancorp has recently finalized its repurchase of TARP shares but it has not yet announced a dividend raise. FITB has one of the strongest capital ratios among major banks, as it has diluted its shareholder base significantly from capital raises during the last two years.

Regions Financial looks to be the reject of the group as its stock moves lower. The banks has the worst capital ratios, and loan quality among major banks. Shareholders have bid the stock higher in recent months in hopes that another bank will buy the troubled company.

Buffett's Coca Cola Wells 50% full (NYSE: KO) (NYSE: WFC)

NEW YORK - Warren Buffett the legendary investor and CEO of Berkshire Hathaway announced in his regulatory filing today that he has sold all of his: Bank of America, Lowes, Becton Dickinson, Comcast, Lowes and Nalco Holdings. The entire portfolio is now down to 25 stocks with Coca Cola and Wells Fargo making up approximately 50%. Other notable stocks in the portfolio include U.S. Bancorp, American Express and Kraft which all together make up close to 70% of Buffett's stock portfolio.

Most of the sales of Berkshire stock are attributed to the retiring of Lou Simpson, who led Geico for thirty 30 years. The money will likely be given to Todd Combs the new employee of Berkshire and former hedge fund manager who will handle $3 billion in investments.

The sale of Bank of America stock seemed to be separate from the Lou Simpson portfolio. Buffett never liked BAC stock and has been selling it during the recession. Buffett last sold BAC in October 2008 when it traded around $15. Perhaps $15 is the threshold around what he believes BAC is worth.

Buffett says when it comes to banks, that " because leverage of 20:1 magnifies the effects of managerial strengths and weaknesses, we have no interest in purchasing shares of a poorly-managed bank at a 'cheap price.' Instead, our only interest is in buying into well-managed banks at fair prices"

It could be interpreted that Buffett is saying that while BAC is undervalued he would rather be buying Wells Fargo which is fairly valued. This is of course would be a paradox, since if a bank is fairly valued and another one is cheap, the cheaper one would outperform it. What Buffett is actually saying is that stocks like Citigroup and BAC which trade around book are not as cheap as one might think. And that the old metrics that his mentor Benjamin Graham taught him in finding cheap stocks are not always applicable.

Wells Fargo #1 For The First Time (NYSE: WFC) (NYSE: BAC)(NYSE:JPM)

NEW YORK - Wells Fargo the San Francisco area bank today became the largest bank in the United States by market capitalization. The bank now has a market capitalization of approximately $800 million more than J.P. Morgan which is the second largest bank by capitalization.

While still not at the record price high it reached in September 2008 just before the crash of $40 a share the shares have had impressive performance. The company has managed to keep shareholder value during the biggest financial crisis since the great depression.

Bank of America and Citigroup have greatly dropped on the list as the two banks struggle with bad loans and capital problems.

Citigroup Makes Americans Money (NYSE: C)

The U.S. Treasury has already received in return $41.6 billion of proceeds from Citigroup in stock sales and direct transfers. This compares to its original investment of $45 billion during 2008 and 2009 when the bank stood on the brink of collapse due to poor lending practices. The treasury still owns 12% of Citigroup stock which is valued today at $14 billion. The government is now up 22% on their Citigroup investment and has the opportunity to make more through warrants and stock appreciation.

The President of the United States, Barack Obama, had used Wall Street as an easy mark to rally support for anything he tried to do. Today as Obama's popularity sinks below 50% it may be time to find a new target. Citi, one of the nations most troubled financial institutions, has returned each U.S. taxpayer approximately $33 dollars.

Citigroup stock finished the week up 4.6% to close at $4.09.

U.S. Treasury Lacks Confidence In Citigroup (NYSE:C)

The Treasury Department announced that they have sold $8.15 billion worth of Citigroup (NYSE: C). Allan Edwards the CEO of The Markets Are Open said this shows the government lacks confidence in Citigroup and they are trying to divest themselves from this investment. As of today the government has sold 4.1 billion shares of Citigroup stock for $16.4 billion. However, the treasury still owns 12.4 % of the company or $14 billion.

The government still owns warrants in the company which gives them the option to purchase more stock in the company.

Edwards commented that if the treasury is out, "I am out." I am not going to invest in something that not even the government wants to touch.