By Milana Vinn, Echo Wang and Nupur Anand
NEW YORK (Reuters) – Wall Street executives are generally looking toward business-friendly regulations as they analyze the implications of a second Donald Trump presidency, while some bankers were immediately tasked with discussing potential deals.
Trump’s return to power is likely to significantly ease some of the regulatory pressure the industry has experienced under the Biden administration, banking and private equity executives say.
A smaller government, broad deregulation and tax breaks for corporations and the wealthy are widely expected. In particular, a softer stance on antitrust and less regulation in areas such as banking and cryptocurrencies could boost corporate profits and boost deal flow, they said.
“He is pro-business and anti-regulation,” said Euan Rellie, co-founder and managing partner of investment bank BDA Partners. “His instinct is to cut taxes. That will all help the M&A market.”
“As long as he rules with moderation and not chaos, the markets will welcome him,” Rellie said.
However, according to some managers, this was not self-evident and dampened optimism.
Some bankers worried about how to deal with unpredictable shifts in government policy, the impact of trade tariffs, a potentially dangerous budget path that would add trillions of dollars to the national debt, and the possible tightening of visa programs.
But for now the reactions were euphoric. As U.S. stocks rose sharply, an equity capital markets banker who declined to be named said his colleagues had been given new mandates on Wednesday morning, as well as a chance to pitch for an initial public offering. The message was: ‘let’s get the ball rolling,'” the banker said.
An investment banker working at a global firm in New York also said his firm was called internally to discuss deals, including possibly reviewing some transactions that may not have passed regulatory scrutiny under Lina Khan’s Federal Trade Commission in the Biden administration.
MORE BUSINESS
A softer approach to antitrust issues could promote deal-making in many sectors. Two sources with knowledge of the media industry said the sector faces a period of consolidation over the next two years.
Greg Hertrich, head of U.S. deposit strategies at Nomura, said the banking sector could also see more mergers. “The current number of 4,700 banks in the U.S. could potentially be reduced more quickly to about 2,500,” he said.
Large financial deals will have a greater chance of getting the green light. Shares of payments companies Capital One and Discover Financial Services, awaiting approval of a $35.3 billion deal, soared.
“The Trump administration is expected to be more open to sensible mergers and acquisitions than many believe has been the case under the Biden administration,” said Gene Ludwig, a former top bank regulator who now advises financial institutions as CEO of Ludwig Advisors.
One of the biggest questions for banks now is how strict the new Basel capital standards will be.
Ed Mills, an analyst at Raymond James, said the turnover of regulators as the new administration takes office “will slow the banking regulatory super cycle that has existed in recent years.”
“There is unlikely to be any major banking regulation and this all paints a very favorable picture for banks,” Mills said.
LOTS OF WORries
However, not everyone was celebrating. A lawyer who works with renewable energy companies said he spent all day on the phone with despondent clients. They all tried to reach out to local Republican politicians in districts where they have planned projects, seeking assurances that tax credits and incentives would continue under Biden’s push for green energy.
At a Wall Street firm, the meeting included a discussion about the risk of deficits rising under the Trump administration, a source said. By one estimate, his policies will increase deficits by $7.5 trillion over ten years.
The hope among participants was that Trump’s aides would encourage him not to go to extremes with tariffs and tax cuts, the source said.
Other concerns were more personal, such as the protection of non-US personnel. During Trump’s first term, he took steps to tighten access to a number of visa programs, including suspending many work visas during the COVID pandemic.
A private equity investor in New York said one of the issues raised Wednesday was questions from international workers on H-1B visas about whether they would face difficulty renewing their visas and how their employer could support them.
(Reporting by Milana Vinn, Echo Wang, Kane Wu, Nupur Anand, Tatiana Bautzer, Saeed Azhar, Lananh Nguyen, Dawn Chmielewski and Iain Withers; Writing by Megan Davies; Editing by Edwina Gibbs)
