the federal reserve has released the results of its annual stress tests for the banks similar to the 2022 stress test charles schwab did exceptionally well schwab schw was one of the four banks whose minimum common equity tier 1 or cet1 capital ratio during the stress period increased amid an increase to 228 from 219 for the firm from its fourthquarter ratio of 2022 schwab often references an internal target for its tier 1 leverage ratio of 65675 and its projected minimum in the stress test is 74 we are maintaining our 70 per share fair value estimate for wide moatrated charles schwab schwab’s banking assets are mainly composed of us treasuries and agencymortgagebacked securities so it has a relatively small number of loans that are subject to credit losses in the severely adverse scenario schwab is modeled to incur 14 billion of loan losses which is small when compared with the 27 billion of common shareholders’ equity the company had at the end of the first quarter of 2023 while schwab is well capitalized according to the fed’s stress test we don’t expect the company to materially increase its dividend or share repurchase activity the company will likely retain capital until market scrutiny of unrealized losses on securities portfolios has gone away regulation may also change to include unrealized losses on securities in capital ratios for more banks so schwab may also retain earnings in anticipation of this change