The major U.S. banks have successfully passed their annual Federal Reserve stress tests, signaling strong financial health and the capacity to remain solvent even in the face of severe economic downturns. According to Michelle Bowman, the Fed’s Vice Chair for Supervision, “Large banks remain well capitalized and resilient to a range of severe outcomes,” including a spike in unemployment to 10%, a broad economic contraction, and significant declines in both residential and commercial real estate markets.
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Clearing the stress tests paves the way for these institutions to increase dividend payouts and initiate or expand share repurchase programs—actions some banks have already begun to take, as we’ll explore in more detail below.
Banking stocks can offer compelling investment opportunities due to their stable, mature business models, reasonable valuations, attractive dividend yields, and consistent returns to shareholders. In this article, we’ll examine three of the largest and most prominent names—J.P. Morgan Chase (JPM), Bank of America (BAC), and Wells Fargo (WFC)—to assess which currently presents the most appealing investment opportunity.
J.P. Morgan Chase (NYSE:JPM)
J.P. Morgan Chase, the largest bank in the U.S. with $3.6 trillion in assets, operates across a broad range of business segments—including Consumer and Community Banking, Commercial and Investment Banking, and Asset and Wealth Management—making it one of the most well-diversified financial institutions in the industry.
The bank passed its Federal Reserve stress test with strong results and promptly announced an increase in its quarterly dividend, raising it from $1.40 to $1.50 per share for Q3. This marks the second dividend increase from the company this year—an impressive achievement that underscores JPM’s confidence in its long-term earnings potential and its commitment to rewarding shareholders.
This latest hike continues a long-standing trend of shareholder-friendly policies: JPM has paid a dividend for 28 consecutive years and has grown that payout for 14 straight years. The stock currently offers a 1.9% yield, which is comfortably above the S&P 500’s (SPY) average yield of 1.3%. Commenting on the increase, CEO Jamie Dimon stated, “The board’s intended dividend increase, our second this year, represents a sustainable level of capital distribution to our shareholders and is supported by our strong financial performance.”
Beyond dividends, J.P. Morgan is further enhancing shareholder value through a newly authorized $50 billion share repurchase program. Share buybacks reduce the number of shares outstanding, boosting earnings per share and increasing ownership value for remaining shareholders. They can also signal management’s confidence in the company’s intrinsic value. As Dimon noted, “The new share repurchase program provides the ability to distribute capital to our shareholders over time, as we see fit.”
Valuation-wise, J.P. Morgan remains attractively priced. The stock trades at 15.7x projected 2025 earnings, notably below the S&P 500’s forward price-to-earnings ratio of 22, offering a compelling entry point for long-term investors.
Is JPM a Good Stock to Buy?
JPM earns a Moderate Buy consensus rating based on 14 Buys, six Holds, and one Sell ratings assigned in the past three months. The average analyst JPM stock price target of $283.10 implies ~3% downside from current levels over the next twelve months.
Bank of America (NYSE:BAC)
With $2.6 trillion in assets, Bank of America may be smaller than J.P. Morgan Chase, but it remains a dominant force in the U.S. banking sector. Headquartered in Charlotte, the bank operates across a broad and diversified set of business segments, including Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, and Global Markets.
Following its successful performance in the Federal Reserve’s stress test, Bank of America announced an 8% increase in its quarterly dividend to $0.28 per share, effective in Q3. The bank has demonstrated a strong track record of returning capital to shareholders, having paid a dividend for 30 consecutive years and raised its payout for 11 years in a row. The stock currently yields 2.2%, offering an attractive income stream for investors.
Bank of America also stands out for its compelling valuation. Shares trade at just 13.3x projected 2025 earnings—well below the broader market and slightly more affordable than J.P. Morgan Chase, making it a value-oriented option in the financial sector.
Is Bank of America a Buy, Sell, or Hold?
BAC earns a Strong Buy consensus rating based on 17 Buys, two Holds, and zero Sell ratings assigned in the past three months. The average analyst BAC stock price target of $50.94 implies ~4.5% upside potential from current levels.
Wells Fargo (NYSE:WFC)
With $1.7 trillion in assets, Wells Fargo (WFC) remains a major player in the U.S. banking industry. The bank operates across four key business segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management, ensuring a well-diversified operational footprint.
Following a successful performance in the Federal Reserve’s annual stress test, Wells Fargo announced a 2.5% increase in its quarterly dividend, raising the payout from $0.40 to $0.45 per share. This development will be welcome news for shareholders. While the bank has raised its dividend for the past three years, its dividend track record is still in recovery mode. In 2020, Wells Fargo was required to cut its quarterly payout from $0.51 to $0.10 per share due to Federal Reserve restrictions following that year’s stress test. The bank continues to make progress toward restoring its former dividend levels.
In terms of valuation, Wells Fargo shares remain attractively priced, trading at just 14.2x projected 2025 earnings, positioning it as a cost-effective alternative alongside peers like J.P. Morgan Chase and Bank of America.
Is Wells Fargo Stock a Good Buy Now?
WFC earns a Moderate Buy consensus rating based on 13 Buys, five Holds, and zero Sell ratings assigned in the past three months. The average analyst WFC stock price target of $83.21 implies ~1% upside potential from current levels.
Three Attractive Banks and One Clear Winner…
I maintain a positive outlook on all three of these large-cap U.S. banking stocks. Each institution successfully passed the latest round of annual stress tests, reflecting its strong financial position. They are all trading at relatively modest valuations compared to the broader market. They are actively returning capital to shareholders through dividend growth, share repurchase programs, or a combination of both.
While the three are comparable in terms of valuation and yield, J.P. Morgan Chase stands out as the most compelling choice. Its consistent track record of dividend increases—including two notable hikes within the past year—demonstrates a clear commitment to shareholder returns. Additionally, the company’s recently announced $50 billion share buyback program further reinforces its strong capital return strategy.