Banks increase dividends after passing stress test. Their stocks are on the rise.

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Some of the nation’s largest banks announced plans to increase dividends after passing the Federal Reserve’s annual stress test earlier this week.

The Fed wanted banks to wait at least two days after the stress tests to unveil their capital plans. After markets closed on Friday,

JPMorgan Chase

(ticker: JPM) said it would increase its quarterly payout to $1.05 per share from $1 previously.

Morgan Stanley

(MS) increased its dividend to 85 cents per share from 77.5 cents.

Wells Fargo

(WFC) increased its payout by 5 cents to 35 cents per share.

Goldman Sachs

(GS) increased its quarterly dividend from $2.50 to $2.75 per share. And

Citigroup

(C) increased its payout by 2 cents to 53 cents per share.

Each year, the Fed tests the banking behemoths to see if their balance sheets are strong enough to withstand serious stresses on the economy and financial markets. Results released Wednesday suggest the 23 participating banks would have enough capital to absorb up to $541 billion in losses – in a doomsday scenario – even if unemployment hit 10% and the stock market plunged 45%.

Banking stocks have lagged the wider market lately as the collapse of a few mid-sized banks earlier this year sparked widespread concerns about the overall health and stability of the sector. .

The latest stress test has restored market confidence and given the group a good boost.

JPMorgan shares have gained 4.9% since Wednesday’s close,

Wells Fargo

jumped 5.1%, shares of Morgan Stanley rose 1.7% and

Goldman Sachs

the stock rose 2.8%.

Citigroup

shares have slipped 0.4% since Wednesday, however, an outlier in the group.

Write to Evie Liu at evie.liu@barrons.com