June 30 (Reuters) - Wall Street's biggest banks rose in premarket trading on Monday after sailing through the Federal Reserve's annual health check, setting the stage for billions in stock buybacks and dividends.

The central bank said on Friday that 22 of the largest U.S. banks were well-positioned to withstand a future economic downturn and continue lending, with its stress test showing firms maintained strong capital levels even after incurring hundreds of billions of dollars in losses.

The results are a strong sign that U.S. lenders are in good shape even amid heightened economic uncertainty, helping government officials and investors understand if banks can continue lending money even during a crisis.

Passing the stress test also gives banks the green light to proceed with shareholder payouts, including dividends and buybacks.

"All the participant banks passed the stress test (which was not a surprise), and this lends support to our view that they remain well positioned to return capital should they so choose," analysts at brokerage RBC Capital Markets said.

Goldman Sachs and Wells Fargo up 2%; Bank of America and UBS rose 1%.

Banks did better in the 2025 stress test compared to 2024, partly because this year's test was less stringent. The test simulates an economy in crisis, so since the real economy was already a bit weaker before the test, the scenario ended up being less severe.

"In general, the results were positive across the board and supportive of an improving capital return backdrop for all participants," Jefferies analysts wrote in a note, adding that stress capital buffers will not be finalized until August, and banks may still have room to adjust dividend increases.

The 2025 test involved a severe global recession that included a 30% decline in commercial real estate prices and a 33% decline in home prices. The unemployment rate spiked 5.9 percentage points to 10% under the test.

The Federal Reserve rolled out its Dodd-Frank stress tests in 2011 to gauge whether the biggest U.S. banks could weather a sharp economic downturn, aiming to prevent a repeat of the 2008 financial crisis.

Banks have long pushed back against the exercise, arguing that it is overly complex, costly to conduct and restricts capital returns even when firms are financially sound.

The S&P 500 Banks Index .SPXBK, which tracks large-cap banks, has risen about 12% so far this year through the previous close, outpacing a 5% gain in the benchmark S&P 500 .SPX.