Banks Boost Dividends After Passing Stress Test. Their Stocks Are on the Rise.

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Some of the largest banks in the nation have announced plans to raise dividends after passing the Federal Reserve’s annual stress test earlier this week.

The Fed wanted banks to wait at least two days after the stress tests to unveil capital plans. After markets closed on Friday,

JPMorgan Chase

(ticker: JPM) said it would raise its quarterly payout to $1.05 per share, up from $1.

Morgan Stanley

(MS) increased its dividend to 85 cents per share from 77.5 cents.

Wells Fargo

(WFC) raised its payout by 5 cents to 35 cents per share.

Goldman Sachs

(GS) boosted its quarterly dividend from $2.50 to $2.75 per share. And

Citigroup

(C) lifted its payout by 2 cents to 53 cents per share.

Every year, the Fed tests the banking juggernauts to see if their balance sheets are sound enough to withstand severe stress in the economy and financial markets. Results released Wednesday suggest that all 23 banks that participated would have enough capital to absorb as much as $541 billion losses—in a doomsday scenario—even if unemployment were to hit 10% and the stock market were to plunge 45%.

Bank stocks have lagged behind the broad market lately as the collapse of a few midsize banks earlier this year triggered widespread concerns about the sector’s overall health and stability.

The latest stress test has injected some renewed confidence into the market and gave the group a nice boost.

JPMorgan stock has gained 4.9% since Wednesday’s close,

Wells Fargo

has jumped 5.1%, Morgan Stanley shares have risen by 1.7%, and

Goldman Sachs

stock has increased 2.8%.

Citigroup

shares, however, have slid by 0.4% since Wednesday, an outlier of the group.

Write to Evie Liu at evie.liu@barrons.com