U.S. bank stocks rise after Fed stress test results
U.S. bank stocks moved higher Monday following the release of the Federal Reserve’s annual stress test results, which Wells Fargo analysts said marked a turning point toward “less onerous, less volatile, and more transparent” regulation, News.az reports citing Investing.
In premarket trading, Goldman Sachs is up 2.4%, while JPMorgan has gained 0.6%, Morgan Stanley and Citi have risen 0.4%, Wells Fargo has climbed 2%, and Bank of America has increased by 1%.
“The stress test is a clear demarcation that regulation is becoming less onerous,” Wells Fargo wrote.
Analysts highlighted Goldman Sachs as the “big test winner,” along with JPMorgan, Bank of America, M&T Bank (NYSE:MTB), and Citi—Wells Fargo’s “dominant #1 pick.”
The Fed’s changes to its stress test methodology are said to have contributed to the positive outcome.
These included “lower loan losses, lower private equity losses (helped GS), and less global market shock.”
Additionally, Wells Fargo noted that changes in hedging treatment and the removal of non-recurring expenses from past results positively impacted banks’ capital calculations.
That capital could support “more loans ($1T theoretically), deals, and buybacks,” with JPMorgan, Goldman Sachs, Citi, and Bank of America said to be best positioned to benefit.
Goldman Sachs’ stress capital buffer (SCB) is now estimated to be lower than Morgan Stanley’s, a notable shift.
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