Federal Reserve releases bank stress test results

Summary

Leslie Picker reports the Federal Reserve's annual stress test results, showing all 32 large U.S. banks remained above minimum capital requirements under a severe hypothetical recession. The aggregate capital decline was modest despite $708 billion in total loan losses. Although this year's results do not affect capital requirements until 2027, the street expects a 6-7% increase in dividends and buybacks, roughly 4-5% of market cap, reflecting a strong banking backdrop.

• All 32 banks passed the Fed's stress test, staying above minimum capital requirements.
• Hypothetical scenario included 10% unemployment, 39% CRE price drop, and 30% housing decline.
• Total projected losses of $708 billion, with credit cards accounting for 29%.
• Aggregate capital declined only 1.6 percentage points under the severe scenario.
• This year's test does not change bank capital requirements until 2027.
• JP Morgan estimates 6-7% increases in dividends and buybacks, ~4-5% of market cap.
• Individual banks expected to announce dividend and buyback plans in the coming days.