The tests indicated banks could withstand 10% unemployment and a 55% drop in stocks. Even if these conditions occurred, the 34 banks could still have, on average, a capital ratio of 9.7%, well above the 4.5% required by law. The capital ratios are a measure of the cushion of capital a bank holds against unexpected losses.
According to Barclays analysts, JPMorgan is set to lead the way, with $19 billion in combined dividends and buybacks. Bank of America and Wells Fargo could follow, both with about $15 billion in buybacks and dividends. In all, U.S. banking giants are expected to return $80 billion to shareholders this year by some estimates.
The KBW Bank Index is down over 25% so far this year.
"Banks are well capitalized, which is a comforting data point given the last major recession in 2008-09, and many, notably JPMorgan Chase, are bolstering their reserves as they prepare for a recession. Normally rising rates would be the wind in banks's sales, but the threat of a deep downturn may be to blame for investors' muted reaction to bank stocks," said Caleb Silver, Editor-in-Chief of Investopedia.