The U.K.'s seven largest banks have passed the Bank of England's stress test for the third year in a row, showing they can weather an economic shock more severe than the actual financial crisis and a worst-case disorderly Brexit without having to curb lending.
Nationwide Building Society was the strongest performer in the stress test in terms of capital. In the minimum stressed scenario, Nationwide's common equity Tier 1 capital ratio — a key measure of balance sheet strength — would fall to 13.1% from 31.7% in 2018, above its 7.9% hurdle rate. The 13.1% figure is inclusive of "management actions" and the conversion of Additional Tier 1 bonds into equity.
HSBC Holdings PLC, meanwhile, would see its CET1 ratio decline to 8.9% from 14.0%, while that of Standard Chartered PLC would drop to 9.0% from 14.2% — both ratios are above the banks' hurdle rates of 7.7% and 6.9%, respectively.
In terms of leverage ratio under the same stressed scenario, HSBC is leading the ranks with 5.3%, above its 3.86% hurdle rate. Meanwhile, Santander UK Group Holdings PLC and Barclays PLC are projected to have the joint-lowest leverage ratio of 3.8%, compared to their respective hurdle rates of 3.57% and 3.63%.