Big Banks Stocks Rise on Strong Stress Test Results

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Key Takeaways

• Large bank shares gained Monday following positive results from the Federal Reserve's annual stress tests.

• The Fed said the 22 firms analyzed had enough money on hand to easily survive a major recessions.

• Bank of America noted that Goldman Sachs had the biggest year-over-year stress test improvement.

Shares of major banks, including JPMorgan Chase (JPM), Goldman Sachs (GS), and Wells Fargo (WFC), advanced Monday after the Federal Reserve said those institutions could easily survive a recession.

In its annual stress tests designed to gauge how well financial firms could stand up to a crisis put in place following the Great Recession, the Fed noted that the banks have sizable amounts of money to withstand a major blow.

Fed Vice Chair for Supervision Michelle Bowman noted Friday that large banks "remain well capitalized and resilient to a range of severe outcomes."

This year's stress test looked at what would happen if the 22 institutions surveyed faced a massive $550 billion loss as borrowers defaulted on their payments. The Fed noted that all 22 have enough cash available to remain above what is considered their minimum capital requirements.

In a note to clients, Bank of America pointed out that the results were better than most investors expected, adding that Goldman Sachs had the biggest year-over-year improvement.

The news lifted shares of JPMorgan Chase and Goldman Sachs to all-time highs.

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