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The
test showed the average capital ratio for the 23 banks was
higher than last year when the central bank had reviewed 34
lenders against a slightly easier scenario.
This year's test, which was devised before the latest banking
crisis, checked if banks would stay above the minimum 4.5%
capital ratio during economic stress and macroeconomic
instability.
Shares of the top performer in the test, Charles Schwab, gained
1.8%, while regional lender Citizens Financial dropped 2% after
coming last.
Major banks JPMorgan Chase, Wells Fargo, and Bank of America
gain between 1% and 1.7%.
Of the six regional lenders that were part of the test, Bank of
New York Mellon and US Bancorp added 1.9% and 1.3%,
respectively.
While the test results paved way for shareholder returns through
dividends and buybacks, Wall Street analysts warned an uncertain
economy and banks awaiting regulatory clarity will lead to
limited capital return in the near-term.
"Upcoming regulations will likely lead to higher capital
requirements for all banks above $100 billion of assets," said
analysts at brokerage Jefferies, adding that many banks have
already pulled back on capital return.
RBC Capital Markets analysts said though the largest U.S. banks
remain strong even in a severely stressed scenario, management
teams will likely be prudent on capital.
"With the recent banking crisis driving banks to be more
conservative in the near-term on capital and balance sheet
management, we see share buyback activity as being limited for
the remainder of 2023," the brokerage said.
The lenders have regained some ground after a troubled start to
the year that was marked by the collapse of three mid-sized
banks due to a flight of deposits at Silicon Valley Bank.
The KBW Regional Banking Index has recovered 6.04% this month,
but still remains down 24.5% for the year, through previous
close.
Meanwhile, the S&P 500 Banks Index, tracking a basket of
large-cap bank stocks, is up 0.9% quarter-to-date, but has
fallen 12.2% so far this year.
(Reporting by Manya Saini in Bengaluru; Editing by Arun Koyyur)
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