Bank stocks rose Tuesday a day ahead of the publication of the Federal Reserve’s annual stress test results for U.S. banks after a difficult first half for the sector as it absorbed the impact of three regional bank failures this year.
After regulators have studied bank balance sheets and made any potential tweaks to capital adequacy to protect the U.S. financial system, dividend and stock buyback plans may become clearer. “The Fed looked a bit behind the times by not having more rigorous testing for a rising interest rate environment, and it will try to fix that,” Katz said. “It will also address concerns about bank liquidity.”
The sector also faces potential significant regulatory changes in capital, liquidity, and debt funding, said analyst Vivek Juneja of J.P. Morgan Chase. He said he expects bank stocks to remain choppy in the near term. Investment banking activity is showing some “green shoots” but trading revenue has fallen amid volatility, he said.
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