(Reuters) - Shares in the biggest U.S. banks rose on Friday after the Federal Reserve completed its annual stress test giving financial institutions the go-ahead for plans to return capital to investors through dividends and buybacks.
The S&P 500 bank sector index .SPXBK was last up 1.9 percent after touching its highest level in a week. Wells Fargo & Co (WFC.N) led the pack with a 5.1 percent gain, and most of the index’s other banks rose more than 1 percent.
Deutsche Bank AG’s (DBKGn.DE) U.S. subsidiary was the only bank to fail due to “widespread and critical deficiencies” in its capital planning controls.
The Fed also placed conditions on three banks that passed the test.
Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N) cannot increase capital distributions and State Street Corp (STT.N) must improve its counterparty risk management and analysis, the Fed said.
Aberdeen Standard Investments equity analyst Michael Cronin said the results were a modest positive for stocks in the sector, which has been pressured recently by concerns about a flattening yield curve.
“Overall things look OK. The big winner is probably Wells Fargo because there was a little concern about them going into CCAR. They also had a good size capital return,” said Cronin.
The test results are “not really huge needle movers for estimates overall. At best you’re up a couple of percent in annual estimates but nothing to move the group significantly,” he said.
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