Bank stocks rose Monday following the Federal Reserve’s late Friday announcement of its annual stress test results. Wall Street analysts say these two Club holdings came out on top. The news Morgan Stanley analysts described Goldman Sachs and Wells Fargo as the “biggest winners” of the 2025 stress tests, which put U.S. banks with at least $100 billion in assets through hypothetical economic downturn scenarios to see how each would weather the volatility. While all 22 banks surveyed passed, Morgan Stanley said in a Sunday note that Goldman and Wells were the most improved from last year. That’s because both had their stress capital buffers lowered more than the majority of their peers. Those buffers are what regulators use to determine how big of an emergency fund a bank should keep in case of another financial crisis. Goldman, for example, experienced the biggest decrease in stress capital buffers among the group. “The size of the decline is much sharper than what we or the market expected,” Morgan Stanley said, adding that Goldman in this year’s Fed tests saw its hypothetical stressed trading and counterparty losses go down significantly compared to 2024. The same can be said for Wells Fargo, whose capital requirement in the tests went down the second most among its peers. This matters because easing capital requirements can pave the way for Wells Fargo and Goldman to increase dividends and share buybacks. Both of these are typically announced in the sessions following the annual results. Additionally, looser rules can also lead to more loan growth and new investments in growing lines of businesses since firms don’t have to be quite as conservative with their capital. In a Sunday note, Wells Fargo analysts forecasted that this year’s results would free up roughly $50 billion in extra capital for large banks. (The research side of these big Wall Street firms is separate from the business of the banks, and the analysts never cover their own stocks.) Zooming out, however, the Wells analysts said that the 2025 results were “more evidence that this period is the most positive regulatory change for banks in three decades.” They added, “The Fed stress test is a clear demarcation that regulation is becoming less onerous, less volatile, and more transparent both in results and the Fed’s comments.” Big picture The financial sector was leading Monday’s markets, with Goldman shares advancing more than 2% and hitting earlier in the session an all-time intraday high of just over $714 each. Wells Fargo rose over 1% and, at its highs of the day, came within pennies of its record high of $81.50 set on Feb. 6. The positive results and the group’s outperformance follow a slew of other positive developments for these names. As expected, bank regulations seem to be easing under the Trump administration. Last week, the Fed proposed tweaks to capital requirements on the nation’s most important banks, which include Goldman and Wells. Changes would make it easier for these firms to buy more U.S. government bonds and lend more freely. The regulatory proposal was made even more clear in remarks from the Fed’s new vice chair for supervision, Michelle Bowman. In a speech last week, she said, “This proposal takes a first step toward what I view as [a] long overdue follow-up to review and reform what have become distorted capital requirements. Bowman was appointed by President Donald Trump to serve as the Fed’s top banking regulator and was confirmed by the Senate in early June. There’s been a big pickup in Wall Street dealmaking activity in recent months as well. Goldman Sachs was tapped as an underwriter for high-profile initial public offerings (IPOs) such as Chime and eToro . That means more fees for the banking behemoth. Wells Fargo also saw its long-standing $1.95 trillion Fed-imposed asset cap removed earlier this month after seven years. Fellow Club financial holding Capital One closed its $35 billion acquisition of credit card and payment system company Discover last month — a deal seen as evidence of a more relaxed regulatory environment under Trump. To be sure, Capital One passed the Fed’s 2025 stress tests, too. The firm’s capital requirements eased as well – albeit less than Wells and Goldman. Still, Morgan Stanley analysts described it as a “positive story.” Capital One, which is technically a bank, is largely a credit card issuer. Bottom line It’s a great time for big bank stocks. The Fed’s stress test results are a further indication of easing regulations for Goldman, Wells, and Capital One that can free up more capital to go back to its shareholders, like us. In the case of Goldman Sachs, additional capital can allow the firm to grow its wealth management division, which saw a double-digit revenue increase for all of last year. Our main thesis on Goldman continues to be on the rebound in Wall Street dealmaking, such as mergers and acquisitions and IPOs, as it relates to the company’s giant investment banking business, which saw revenue grow more than 24% last year. Additionally, flexibility in capital for Wells Fargo can pave the way for more expansion in its budding investment banking division. We’ve long said investments in this business are a great opportunity for Wells to diversify its revenue streams further, so it’s not as reliant on Fed-influenced interest-based income. “What I think that matters is [CEO] Charlie Scharf wants to take over a lot of businesses done by other banks,” Jim Cramer said Monday, citing an influx of senior hires in Wells’ dealmaking division, which we documented in March 2024 . Out of these three bank names, however, Jim said investors should purchase more shares of Capital One on its recent acquisition of Discover. In part, that’s because the credit card issuer will be able to grab shares from its rivals. “Capital One is a company that can take on American Express ,” Jim said. “I think people should still be buying it.” (Jim Cramer’s Charitable Trust is long GS, WFC, COF. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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