Why Several Bank Stocks Are Moving Higher Thursday

Shares of several bank stocks are trading higher Thursday following the Federal Reserve's stress test results, which showed all 23 banks tested remained above their minimum capital requirements during a hypothetical recession.

What Happened: The Fed on Wednesday released the results of an annual stress test on banks, which tests large banks' ability to continue to lend and support the economy during a severe recession.

"Today's results confirm that the banking system remains strong and resilient," said Michael Barr, the Fed's vice chair for supervision. 

"At the same time, this stress test is only one way to measure that strength. We should remain humble about how risks can arise and continue our work to ensure that banks are resilient to a range of economic scenarios, market shocks, and other stresses."

Related Link: Fed's 2023 Stress Test Results: How Many Of 23 Banks Passed?

All banks that participated in the test passed by remaining above minimum capital requirements, but in the hypothetical scenario, the banks suffered projected losses of $541 billion. The losses included over $100 billion from commercial real estate and residential mortgages and $120 billion from credit cards, which were both higher than last year's results.

The Fed also performed a market shock on the large banks' trading books to test against inflationary pressures for the first time. The Fed said the banks' trading books were resilient to the rising rate environment test.

Price Action: JP Morgan Chase & Co JPM, Bank Of America Corp BAC and Wells Fargo & Co WFC are among the banks moving higher following the Fed's stress test. 

At time of publication, JPMorgan shares were up 1.52% at $140.70, BAC shares were up 1.96% at $28.62 and WFC was up 1.82% at $41.35, according to Benzinga Pro.

Photo: Chetiya Sahabandu from Flickr