Bank stocks rise after Fed stress test shows strong capital positions

Published 27/06/2025, 22:20
Bank stocks rise after Fed stress test shows strong capital positions

Investing.com -- Bank stocks moved higher on Friday after the Federal Reserve’s annual stress test showed major financial institutions are well-positioned to weather a severe economic downturn while maintaining adequate capital levels.

Goldman Sachs Group Inc (NYSE:GS) led the gains, rising 3.1%, while Wells Fargo & Company (NYSE:WFC) climbed 1.9%. Bank of America Corp (NYSE:BAC) added 1.4%, with JPMorgan Chase & Co (NYSE:JPM) and Capital One Financial Corporation (NYSE:COF) each up 0.5%.

The Fed’s stress test revealed that all 22 banks tested remained above their minimum common equity tier 1 (CET1) capital requirements during the hypothetical severe recession scenario. The aggregate decline in the CET1 capital ratio was just 1.8 percentage points, smaller than declines observed in recent years.

"Large banks remain well capitalized and resilient to a range of severe outcomes," said Fed Vice Chair for Supervision Michelle W. Bowman in the announcement.

This year’s stress scenario, which was less severe than last year’s due to the test’s countercyclical design, included a severe global recession with a 30% decline in commercial real estate prices and a 33% decline in house prices. It also modeled an unemployment rate rising by nearly 5.9 percentage points to 10%.

Despite these challenging conditions, the banks collectively absorbed projected hypothetical losses of more than $550 billion, including nearly $158 billion in credit card losses, $124 billion in losses from commercial and industrial loans, and $52 billion in commercial real estate losses.

The Fed noted it plans to address unintended volatility in its stress test models when it discloses and seeks public comment on models and scenario design framework later this year.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.