WASHINGTON, D.C. -

A total of 28 of the 31 commercial banks passed the Federal Reserve’s Comprehensive Capital Analysis and Review (CCAR), including several institutions with significant auto finance market share such as Ally Financial, Capital One, Chase and Wells Fargo.

While the Fed gave tentative support for Bank of America, officials on Wednesday objected to two firms’ plans on qualitative grounds, including Santander, which recently agreed to a $9.35 million settlement with the Department of Justice for violations of the Servicemembers Civil Relief Act (SCRA) in connection with vehicle repossessions.

The other institution to receive an objection from the Fed was Deutsche Bank.

In its fifth year, the Fed reiterated that CCAR evaluates the capital planning processes and capital adequacy of the largest U.S.-based bank holding companies, including the firms' planned capital actions such as dividend payments and share buybacks and issuances.

“Strong capital levels act as a cushion to absorb losses and help better ensure that banking organizations have the ability to lend to households and businesses even in times of stress,” Fed officials said.

When learning of the Fed’s decision, new Ally chief executive officer Jeffrey Brown went through the main points of the company’s plan reviewed by the financial overseer.

Ally’s capital plan includes the continued payment of dividends and interest to holders of its outstanding capital securities, as well as a number of meaningful actions intended to further rationalize the company's capital structure and drive improved financial performance in the future

Four other highlights include:

• Redemption of $1.3 billion of its Series G preferred securities outstanding in April  

• Redemption or repurchase of its $1 billion in Series A preferred securities outstanding by the second quarter of 2016

• Redemption of $500 million of its trust preferred securities outstanding in the first quarter of 2016

• Additional repurchases of its high-cost unsecured debt

“These actions are key steps to enable Ally to further advance its plans to normalize its capital structure and reduce its funding costs in the future, which will have a meaningful result on overall performance,” Brown said.  “With respect to our operations, we have a strong capital and liquidity profile to support our broad customer base, including our continued momentum in expanding our auto finance growth channel.”

Ally also provided a redemption notice for $1.3 billion of its Series G preferred securities, with a redemption date of April 10.  As a result, the company expects to incur an approximately $1.2 billion reduction to common capital in the second quarter. 

The capital plan also contemplates an additional $200 million common capital reduction from the repurchase of high-cost unsecured debt and/or preferred securities.  The timing of the capital actions will be subject to various factors including the company's capital position, liquidity, financial performance and general market conditions. 

Over at Wells Fargo, the company said that its 2015 Capital Plan includes a proposed dividend rate of $0.375 per share for the second quarter, subject to consideration and approval by its board of directors at its regularly scheduled meeting in April. The proposed dividend rate represents a 7-percent increase over the current rate of $0.35 per share.

“We are pleased to receive the Federal Reserve Board’s non-objection to our capital plan to increase our common stock dividend and continue our strong share repurchase activity,” Wells Fargo chairman and CEO John Stumpf said.  “This result again demonstrates the benefit of our diversified business model and conservative risk discipline, which have positioned us well to return capital to shareholders within our targeted range while maintaining strong capital levels.”

Meanwhile, Santander believed going into the review process that its capital ratios would remain above minimum regulatory requirements under the Federal Reserve’s hypothetical severely adverse economic scenario, according to the latest stress tests conducted by the Federal Reserve Board.

Santander explained its internal results under the severely adverse scenario also showed continued resilience through the forecast horizon. Using the companies’ internal models and processes, Santander’s Tier 1 common ratio under the severely adverse scenario would decline from 13.4 percent at Sept 30 of last year to 10.2 percent on Dec. 31, 2016.

“The bank’s benchmark capital ratio would therefore remain above the minimum regulatory requirement of 5 percent,” Santander said on March 5, almost a week before the Fed make its decision.

When considering an institution’s capital plan, the Federal Reserve explained that it considers both quantitative and qualitative factors. These include, respectively, a firm’s projected capital ratios under a hypothetical scenario of severe economic and financial market stress and the strength of the firm’s capital planning processes.

The Federal Reserve may object to a capital plan based on quantitative or qualitative concerns. After the Federal Reserve objects to a capital plan, the institution may not make any capital distribution unless expressly permitted by the Federal Reserve.

“Our capital plan review helps ensure that the capital distribution plans of large banks will not compromise their ability to continue lending to businesses and households even during a period of serious financial stress," Federal Reserve Gov. Daniel Tarullo said. “It also provides a structured assessment of their risk management capacities.”

Besides Ally, Capital One and Wells Fargo, the Federal Reserve did not object to the capital plans of:

— American Express
— The Bank of New York Mellon
— BB&T
— BBVA Compass
— BMO Financial
— Citigroup
— Citizens Financial Group
— Comerica
— Discover Financial Services
— Fifth Third Bancorp
— Goldman Sachs Group
— HSBC North America Holdings
— Huntington Bancshares
— Keycorp
— M&T Bank
— Morgan Stanley
— MUFG Americas Holdings
— Northern Trust
— PNC Financial Services
— Regions Financial
— State Street Corp.
— SunTrust Banks
— U.S. Bancorp
— Zions Bancorporation

Officials mentioned Goldman Sachs, JP Morgan Chase and Morgan Stanley met minimum capital requirements on a post-stress basis after submitting adjusted capital actions.

The Federal Reserve did not object to the capital plan of Bank of America but is requiring the institution to submit a new capital plan by the end of the third quarter to address certain weaknesses in its capital planning processes.

The governing body went on to highlight U.S. firms have substantially increased their capital since the first round of stress tests led by the Federal Reserve in 2009. The common equity capital ratio — which compares high-quality capital to risk-weighted assets — of the 31 bank holding companies in the 2015 CCAR has more than doubled from 5.5 percent in the first quarter of 2009 to 12.5 percent in the fourth quarter of 2014, reflecting an increase in common equity capital of more than $641 billion to $1.1 trillion during the same period.

The firms, collectively, are projecting that they will continue building capital from the second quarter of this year through the second quarter of next year. The 31 institutions tested this year represent more than 80 percent of assets held by domestic bank holding companies, or $14 trillion as of the fourth quarter of 2014.