U.S. Banks Pass Federal Reserve Stress Test

America’s biggest banks have passed the U.S. Federal Reserve’s annual stress test of their
ability to withstand market shocks.

The lenders were found to have enough capital available to manage issues that include high
unemployment, collapsing real estate prices, and a drop in stocks.

Major banks such as JPMorgan Chase & Co. (JPM), Morgan Stanley (MS) and Goldman Sachs
(GS) also faced a hypothetical market shock that tested the resiliency of their trading desks.

The U.S. Federal Reserve said it examined more than 30 lenders and found they were each
able to remain above their minimum capital requirements during the hypothetical economic
meltdown, which would have caused them theoretical losses of $612 billion U.S.

Passing the annual stress test gives the U.S. banks approval to return billions of dollars to
investors in the form of dividend payments and share buybacks.

British bank Barclays (BARC) forecasts that JPMorgan will lead the way among U.S. lenders
with $18.9 billion U.S. in combined dividends and share buybacks, followed by Bank of America
(BAC) and Wells Fargo (WFC) with $15.5 billion U.S. and $15.3 billion U.S. respectively.

In all, the largest U.S. banks are set to return $80 billion U.S. to shareholders this year,
according to industry data.

Last year, dividend payouts by America’s six biggest banks rose by nearly 50% after the
country’s largest banks amassed excess capital during the pandemic. Morgan Stanley alone
doubled its quarterly dividend payout while also announcing $12 billion U.S. in stock buybacks.