U.S. bank stocks rallied after a decisive victory for newly elected President Donald Trump, a sign that major financial institutions on Wall Street expect to have an easier time in Washington under a new Republican administration.
“This should help all banks,” especially the largest ones, Wells Fargo analyst Mike Mayo said in a note Wednesday.
Trump’s victory marks a “new era after 15 years of increased regulation” that followed the 2008 financial crisis, he added.
Major banks, including JPMorgan Chase (JPM), Bank of America (BAC), Goldman Sachs (GS), Wells Fargo (WFC), Citigroup (C) and Morgan Stanley (MS), are all up between 7% and 11% in pre-market trading on Wednesday morning.
The country’s largest lenders have had a banner year thanks to the economy’s resilience during a period of high interest rates and a recovery in their investment banking and trading businesses.
An index tracking 24 of the largest domestically chartered U.S. commercial banks (^BKX) is up 27% so far in 2024, outperforming the broader financial sector and major stock indexes.
The hope is that next year could be even better, as lending and dealmaking on Wall Street increase, while a new Republican administration relaxes some rules for big banks and will be more lenient in approving the kind of corporate mergers that drive big profits. results for Wall Street giants.
One major lender that could benefit from such leniency is major credit card issuer Capital One (COF), which is trying to gain regulatory approval to merge with credit card issuer and network Discover Financial Services (DFS).
Shares of McLean, Virginia-based Capital One rose 11% Wednesday morning.
Capital One CEO Richard Fairbank told analysts two weeks ago that the tie-up was expected to be completed “early 2025,” subject to regulatory and shareholder approval.
Keefe Bruyette & Woods predicts that a Trump administration could make as many as eight leadership changes on its first day at the federal regulators that oversee banks and other financial services companies.
That includes the Justice Department and the Federal Trade Commission, which oversee antitrust issues, as well as the Office of the Comptroller of the Monet (OCC), the Consumer Financial Protection Bureau (CFPB), the Securities and Exchange Commission, and possibly even the Federal Deposit Insurance Company.
What banks hope is that a new government will also relax a new set of controversial capital rules proposed by top bank regulators that would require lenders to set aside larger buffers for future losses.
