US bank stocks rallied following a decisive win by President-elect Donald Trump, a sign that big Wall Street financial institutions expect to have an easier time in Washington under a new Republican administration.
“This should aid all banks” and especially the biggest ones, Wells Fargo analyst Mike Mayo wrote in a Wednesday note.
Trump’s win starts a “new era after 15 years of harsher regulation” that followed the 2008 financial crisis, he added.
Big banks including JPMorgan Chase (JPM), Bank of America (BAC), Goldman Sachs (GS), Wells Fargo (WFC), Citigroup (C), and Morgan Stanley (MS) were all up between 7% and 11% in premarket trading Wednesday morning.
The country’s largest lenders have had a great year thanks to the economy’s resilience during a period of elevated interest rates and a rebound in their investment banking and trading operations.
An index tracking 24 of the largest domestically chartered US commercial banks (^BKX) is up 27% so far in 2024, outperforming the broader financial sector and major stock indexes.
The hope is next year could be even better if lending and Wall Street dealmaking churn higher while a new Republican administration loosens some rules for big banks and applies more leniency in approving the sort of corporate mergers that produce big profits for Wall Street giants.
One big lender that may benefit from such leniency is major credit card lender Capital One (COF), which is trying to get regulatory approval to merge with credit card lender and network Discover Financial Services (DFS).
The stock of the McLean, Va.-based Capital One was up 11% Wednesday morning.
Capital One CEO Richard Fairbank told analysts two weeks ago that the tie-up was expected to be completed “early in 2025 subject to regulatory and shareholder” approvals.
Keefe, Bruyette & Woods predicts that on day one a Trump administration could make as many as eight leadership changes at the federal regulatory agencies that supervise banks or other financial services giants.
That includes the Justice Department and the Federal Trade Commission, which oversee antitrust concerns, as well as the Office of the Comptroller of the Currency (OCC), the Consumer Financial Protection Bureau (CFPB), the Securities and Exchange Commission, and potentially even the Federal Deposit Insurance Corporation.
What banks are hoping is that a new administration would also loosen a new set of controversial capital rules proposed by top bank regulators that would require lenders to set aside greater buffers for future losses.
