$90 Billion Capital Cushion Points To Serious Bank Shareholder Payday: Goldman Sachs

Goldman Sachs analysts are cautiously optimistic about the prospect of major U.S. banks returning more capital to shareholders through buybacks and dividends.

Thanks to regulatory changes and strong results in the Federal Reserve's latest stress tests (CCAR), the top five banks are sitting on an estimated $90 billion in excess capital.

The firm believes banks will gradually raise dividends and continue buybacks, especially as new Fed rules free up an estimated $5.5 trillion in balance sheet capacity. This gives banks more flexibility, especially in stressful times.

Among individual banks, Goldman Sachs names Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC) as the "best-positioned stocks."  

• Bank of America stands out for its strong interest income growth (projected 7% annually through 2026), cost discipline, and potential benefit from regulatory reform. Goldman sees upside to both earnings and capital returns, making the stock attractive at current valuations. The analyst rated the stock as Buy, with the price target lifted from $52 to $56.
• Wells Fargo, with its regulatory asset cap lifted, is expected to boost growth in core banking and trading businesses. Cost-cutting efforts and efficiency improvements could lift profits significantly, with up to 19% earnings upside forecast. The stock is also rated Buy, with the price target raised from $86 to $92.

Analyst Richard Ramsden also revised estimates ahead of the second-quarter results of five other U.S. banks:

• Citigroup Inc (NYSE:C) – rated Buy, with price target raised from $85 to $96.
• JPMorgan Chase & Co (NYSE:JPM) – rated Buy, with price target raised from $305 to $323.
• US Bancorp (NYSE:USB) – rated Neutral, with price target raised from $46 to $49.
• PNC Financial Services Group Inc (NYSE:PNC) – rated Neutral, with price target raised from $178 to $196.
• Morgan Stanley (NYSE:MS) – rated Neutral, with price target raised from $136 to $147.

Ramsden expects banks to report sequential NII (net interest income) growth in the second quarter, due to an uptick in loan growth. The trading revenue environment "remains healthy" in the near term, he added.

Read More:

• Big Banks Pass Fed’s 2025 Stress Test With Ease—But Some Say It Was Too Easy

Image: Shutterstock