NEW YORKWASHINGTON, June 27 Reuters Morgan Stanley, Goldman Sachs, Bank of America and Wells Fargo hiked their dividends on Monday after the U.S. banks cleared their annual stress test exerciselast week.

The U.S. FederalReserve said on Thursday the country39;s largest lenders could easily weather a severe economic downturn, giving them a clean bill of health and paving the way for them to redistribute excess capital to shareholders.

The results allowed banks to announce higher dividends despite the Fed39;s test being tougher than in 2021, pushing up some lenders39; required capital buffers more than expected.

However, JPMorgan Chase and Citigroup kept their payout flat, as a challenging economic environment may require more capital. Citi will likely give an update on its capital plans at its upcoming earnings on July 15, a source familiar with the situation said.

This year39;s dividend hikes were more subdued than in 2021, a bumper year for big bank capital payouts, after lenders amassed piles of excess cash during the pandemic to cover loan losses that never materialized. Morgan Stanley, for instance, doubled its dividend in June 2021.

Under the annual stress test exercise established following the 20072009 financial crisis, the Fed assesses how banks39; balance sheets would fare against a hypothetical severe economic downturn. The results dictate how much capital banks need to be healthy and how much they can return to shareholders.

Goldman Sachs said on Monday…