: Banks get near-term capital flexibility after ‘mostly positive’ stress tests by the Fed: Analyst

J.P. Morgan Chase & Co. JPM, Bank of America Corp. BAC and Goldman Sachs Group Inc. GS reduced their stress capital buffers and will have some near-term capital flexibility after the Fed’s banking stress test results, Citi analyst Keith Horowitz said in a research note on Thursday. Overall, the stress test results “came in better than expected, with stress capital buffers coming down or staying flat for most banks in our coverage,” Horowitz said. JPMorgan, Bank of America and Goldman Sachs “were the biggest winners” with a 1% reduction in their stress capital buffers, while Citizens Financial Group Inc. CFG and Truist Financial Corp. TFC reported “surprise” increases in their stress capital buffers of 0.7% and 0.4% respectively, but both banks remained more than 1% above their implied minimums. “Although we expect the stocks to react positively on the downward revisions as the lower stress capital buffers (SCBs) provide near-term flexibility and could see some modest dividend increases, we do not expect to see major changes to capital return outlook as many banks await further clarity on regulatory reform with Basel III endgame,” Horowitz said. Most bank stocks are gaining ground in pre-market trades. JPMorgan Chase is up by 1.1%, Bank of America is up by 1.1%, Goldman Sachs is up by 1.4%, Citizens Financial is down by 2.2% and Truist is up by 0.3%. Citigroup C is down by 0.1% and Wells Fargo & Co. WFC is up by 1.5%, while Morgan Stanley MS is rising by 1%.

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