The U.S. banking sector is bracing for the 2024 stress test results, scheduled to be released Wednesday after the market closes.

Bank of America analystEbrahim H. Poonawalaexpects this year's stress test to show overall improved capital buffers compared to 2023, given the moderately better severely adverse scenario outlined by the Federal Reserve.

Improved Capital Buffers Expected

According to Poonawala, banks are entering the 2024 stress test with approximately 300 basis points (bp) of excess Common Equity Tier 1 (CET1) capital above regulatory minimums, a notable increase from around 185 bp last year.

"Surprises from the annual stress test results are inevitable given the...