US banks pass Federal Reserve stress test, leading to potential for stock buybacks and dividends

From Yahoo Finance: 2025-06-30 05:34:00

Wall Street’s top banks saw a boost in premarket trading after passing the Federal Reserve’s stress test. The results show banks are well-prepared for economic downturns, allowing for stock buybacks and dividends. Analysts expect an improving capital return backdrop for banks. Shares of Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo all rose.

The stress test showed banks can withstand a severe recession scenario. The 2025 test included a 30% decline in commercial real estate prices, a 33% decline in home prices, and a spike in unemployment to 10%. Despite concerns from banks about the complexity and cost of the test, the results were positive, indicating financial stability.

Investment banks like Morgan Stanley and Goldman Sachs also saw gains in premarket trading. The S&P 500 Banks Index has risen 12% this year, outperforming the S&P 500. The stress test, implemented in 2011 after the 2008 financial crisis, aims to prevent future economic disasters by ensuring banks can withstand economic shocks. Stress capital buffers will be finalized in August.



Read more at Yahoo Finance: US banks rise as Fed stress test success clears path for payouts