Why Shares of Wells Fargo Are Rising Today
Shares of Wells Fargo (NYSE: WFC) were nearly 8% higher as of 11:51 a.m. ET today after the Federal Reserve released results from its annual stress-testing exercise last night, which came out favorably for Wells Fargo.
Every year, the Fed puts the largest U.S. banks through a hypothetical severely-adverse economic scenario to see how they would hold up, in order to ensure the safety and soundness of the banking system. The testing also helps the Fed set minimum capital requirements for banks, which plays a role in determining how much capital they can return to shareholders.
In the scenario this year, which is meant to take place between the fourth quarter of 2021 and the first quarter of 2024, Wells Fargo would see its common equity tier 1 (CET1) capital ratio, a measure of a bank's core capital expressed as a percentage of its risk-weighted assets such as loans, fall from 11.4% to 8.6%.
Source Fool.com
