Wall Street's $100 Billion Payout Parade: JPMorgan, Morgan Stanley, Goldman Lead Capital Return Wave After Acing Fed's 2025 Stress Test

Wall Street's biggest banks are rewarding shareholders with a wave of dividend hikes and buybacks totaling more than $100 billion, after clearing the Federal Reserve's 2025 stress test with capital left to spare.

What Happened: Last week, the Federal Reserve’s annual stress test, which gauges how well large institutions can withstand a severe recession scenario, showed all 22 participating firms remained comfortably above minimum capital requirements.

The aggregate common equity tier 1 (CET1) ratio dropped to a low of 11.6% under the hypothetical downturn, well above the regulatory threshold of 4.5%, according to the results published by the Fed.

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This means that even under the Fed's severely adverse scenario, which includes a deep recession, surging unemployment, and sharp declines in asset prices, the largest banks would still maintain a strong capital cushion, without requiring any government support.

As a result, several of the nation’s leading banks have wasted no time in announcing major capital return plans for shareholders.

JPMorgan Chase & Co. JPM led the way with a 7% hike in dividends, alongside $50 billion in fresh stock buyback authorizations. This was the result of a lower stress capital buffer of 2.5%, down from 3.3%, allowing it to free up capital to return to investors.

Similarly, Morgan Stanley MS authorized a $20 billion buyback program, along with a 10% hike in its dividends, followed by Goldman Sachs Group Inc GS, Wells Fargo & Co. WFC, Citigroup Inc. C and Bank of America Corp. BAC, all raising their dividends in response to the results, according to a report by Reuters.

Why It Matters: While the major banks passed the tests with ease, analysts note that the simulated downturn made milder assumptions compared to the previous year, featuring smaller declines in housing and commercial real estate prices, alongside a more moderate spike in unemployment.

The 2025 test also failed to include private equity and private credit risks that have since ballooned into a $2 trillion market over the years.

In 2024, the study results were worse than expected for most banks, with higher projected losses compared to the prior year. However, all 31 of the major banks met the capital requirements to address a severe crisis.

Price Action: Shares of JPMorgan Chase were up 0.17% on Tuesday, at $290.41, and are up 0.64% after hours.

JPMorgan scores well on Benzinga’s Edge Stock Rankings, and has a favorable price trend in the short, medium and long terms. Click here to see how it compares with peers and competitors such as Goldman Sachs and Morgan Stanley.

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