The Stress Test Sets the DividendNarrow moat
JPMorgan Chase (JPM) — moat facet
A model the bank cannot inspect decides how much of its own earnings it may return, which is how regulation converts directly into cash flow.
Once a year, a model the bank cannot inspect decides how much of its own earnings it is allowed to give back.
The Federal Reserve uses the severely adverse scenario from its supervisory stress test to set each firm's stress capital buffer, which forms part of its required capital. JPMorgan's current SCB requirement is 2.5% and remains in effect through 30 September 2027; the firm was required to file its annual capital plan submission on 6 April 20261.
The 2.5% is the floor — the minimum any bank can be assigned — which is itself a statement about how the Federal Reserve views this balance sheet.
What makes the arrangement unusual is the direction of accountability. A bank's dividend and buyback capacity are functions of a supervisory judgement rather than of its own earnings or capital position, and the inputs to that judgement have historically moved year to year in ways firms found difficult to anticipate.
For an owner, this is the mechanism through which regulation converts into cash flow. Net payout was 82% over the twelve months to December 2025 and 73% to June 20262 — high, and permitted rather than chosen.
The number to watch is the SCB at each annual reset. At 2.5% it is at its floor, which means it has nowhere to go but up.
The stress capital buffer is 2.5% — the regulatory floor — and runs through 30 September 2027. It cannot improve from here.
In effect through 30 September 2027, with the annual capital plan filed 6 April 2026. A bank's payout capacity is a function of a supervisory model it cannot inspect. At the floor it has nowhere to go but up, and each additional point of required CET1 is roughly $20bn of equity that cannot be returned.
Source: JPMorgan Chase Form 10-K, FY2025 ↗- ReportedThe stress capital buffer is 2.5%, in effect through 30 September 2027, with the annual capital plan submission due 6 April 2026.JPMorgan Chase & Co., Form 10-K FY2025 — capital risk management (SEC, CIK 19617). Basel III common equity Tier 1 capital of $288 billion and a Standardized CET1 ratio of 14.6%; the Standardized CET1 requirement including all regulatory buffers was 11.5%. The stress capital buffer requirement is 2.5% and remains in effect through 30 September 2027, based on the severely adverse scenario of the Federal Reserve's supervisory stress test; the annual CCAR submission was due 6 April 2026. Capital is allocated to the lines of business using standardized risk-weighted assets and the GSIB surcharge under rules currently in effect, reassessed at least annually. The enhanced supplementary leverage ratio rules revise the static leverage buffers to 50% of the bank holding company's US Method 1 GSIB surcharge, capped at 1% for insured depository institution subsidiaries. The July 2023 proposal to amend the US risk-based capital framework (the Basel III endgame) was never finalised; in September 2025 the Federal Reserve's Vice Chair for Supervision indicated regulators may issue an updated proposal in early 2026 replacing it, the timing and content of which remain uncertain. The Apple Card transaction reduced the Standardized CET1 ratio by approximately 25 basis points. — FY2025 · publ. 2026-02-13 · source ↗
- ReportedNet payout over the twelve months to June 2026 was 73%.JPMorgan Chase & Co., second-quarter 2026 earnings release (Form 8-K, exhibit 99.1) — net income $21.2bn ($7.70 per share), or $16.9bn ($6.14) excluding significant items; ROE 24%, ROTCE 29% and ROTCE excluding significant items 23%. Reported revenue $57.3bn and managed revenue $58.0bn; expense $27.3bn with a reported overhead ratio of 48%; credit costs $2.5bn with $2.4bn of net charge-offs and a $149M net reserve build. Average loans up 10% year on year and average deposits up 7%. CET1 Standardized 14.1% and Advanced 14.2%, total loss-absorbing capacity $590bn, Standardized RWA $2.1tn, cash and marketable securities $1.5tn; book value per share $133.01 up 9% and tangible book value per share $113.35 up 10%; Basel III CET1 capital $303bn; supplementary leverage ratio 5.5%; net payout over the last twelve months 73%. Segment returns: CCB ROE 34% with client investment assets up 21%, a Card Services net charge-off rate of 3.34%, card sales volume up 10% and active mobile customers up 6%; CIB ROE 22% with investment banking fees up 30% year on year, a #1 ranking for global investment banking fees at 9.3% wallet share year to date, markets revenue up 35% with fixed income up 6% and equity markets up 86%, and average client deposits up 11%; AWM ROE 48% with AUM of $5.1tn, up 18%. Significant items were a $4.6bn net gain related to Visa shares ($1.27 of EPS) and $1.0bn of gains on certain equity investments ($0.29). Jamie Dimon: 'These results were the product of a particularly favorable environment with an elevated level of market activity, as well as rigorous execution, years of consistent investment and thoughtful capital deployment.' — Q2 2026 · publ. 2026-07-14 · source ↗