2025 Bank Stress Tests Reveal Resilience and Opportunity for Regional Banks 

Published July 17, 2025 – By Alexander Yokum, Senior Vice President, Equity Research

All 22 Banks Passed But Not All Wins Were Equal 

The Federal Reserve’s 2025 stress test results are out, and the verdict is clear: every regional bank tested passed, showcasing the industry’s resilience even under simulated economic downturns. But while all institutions cleared the bar, a few emerged as leaders in capital strength, risk management, and return potential. 

Our latest thematic research report breaks down why some banks, including M&T Bank (MTB) and Wells Fargo (WFC), are now in a stronger position to return capital and drive shareholder value heading into 2026. 

Less Severe Stress, Stronger Results 

This year’s scenario was notably milder than in 2024: 

1. Real GDP contraction eased from -8.5% to -7.8%
2. Housing prices fell 33% vs. 36% a year ago
3. Aggregate capital drawdowns improved, with CET1 ratios declining just 180 bps (down from 280 bps in 2024) 

These shifts led to reduced capital requirements and a renewed focus on share buybacks and dividend growth across the industry. 

What’s Ahead for Regional Banks? 

Our research also explores proposed changes to the Fed’s stress test process, which could create more predictable capital planning, reduce volatility in regulatory requirements, and support higher long-term ROEs. 

Yet the key question remains: Which banks are best positioned to benefit?