Reported 8 months ago
The Federal Reserve will announce the results of stress tests on 32 banks on June 26, which will determine their capital requirements and ability to increase dividends and stock buybacks. Analysts expect the results to be similar to last year (all passing). Even if banks pass the tests, they are likely to adopt cautious capital return strategies due to uncertain economic outlook and regulatory rules. Investors are closely watching the results as it impacts banks' ability to distribute more dividends. Major banks like JPMorgan Chase and Bank of America are being tested along with smaller banks like Huntington. All 23 banks tested in 2023 passed, showing resilience in severe economic downturns. However, banks may still face restrictions in returning capital if found to have insufficient capital. While regulatory authorities are pushing for higher capital requirements to mitigate economic risks, banks view it as unnecessary burden and urge regulators to withdraw the proposal. Analysts at Piper Sandler and Raymond James expect banks to be cautious in managing capital and anticipate moderate increases in stock buybacks and dividends. With economic uncertainty, a significant uptick in overall capital return is unlikely.
Source: YAHOO