Bank of America Aces Fed’s Stress Test, Financials Edge Higher

On Thursday evening, the Federal Reserve announced that it had approved the capital plans of 14 out of 18 major financial institutions following the Comprehensive Capital Analysis and Review (“CCAR”). Two additional firms were granted conditional approval, while two were rejected.

Investors had a close eye on the review for two reasons. First, the results are a measure of how far a financial institution has come since the crisis, and how well it would be able to weather another economic calamity. All things considered, most investors favor stability. Second, passing the test was a prerequisite to long-awaited stock buybacks and dividend payments. In short: banks that promised greater return to shareholders were unable to use these tools until the results were announced.

Of the 14 institutions that passed, Bank of America (NYSE:BAC) came out the victor. The firm demonstrated a particular resilience to adverse economic conditions, and as a result won approval for up to $5 billion in common stock repurchases and will be able to redeem $5.5 billion of preferred stock. Shares climbed more than 4 percent on Friday on heavy volume, making Bank of America the top gainer among its colossal peers…