(Bloomberg) -- Shares of the biggest US banks including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc. surged on Wednesday, as investors wagered that Donald Trump would make good on his promises to lower taxes and slash regulation of the industry.
Trump has vowed to cut the corporate tax rate to as low as 15% from 21% and to eliminate 10 regulations for every new one during his campaign — offering a more attractive environment for banks than his rival Kamala Harris, who had planned to raise corporate taxes.
He’s also promised sweeping changes to the country’s regulatory bodies, which pursued tougher banking rules under Joe Biden. He’s pledged to fire regulators including Securities and Exchange Commission Chair Gary Gensler, saying in July he’d oust the executive on “day one.”
Shares in the banks struck multiyear highs, with Goldman ending the day up 13% and rival JPMorgan closing up 12%, both the most since 2020. Citigroup had climbed by 8% at the end of Wednesday’s trading, the most since July 2022, while an exchange-traded fund that tracks major bank stocks also climbed by the most in four years.
“We are confident that the regulatory pendulum will swing back somewhat,” Mark Fitzgibbon, an analyst at Piper Sandler, said in a note. “Many bankers would quietly complain to us that their examiners were unreasonable, irrational or simply opaque. We believe this will improve with a more bank-friendly administration.”
Trump’s win adds to a string of good news for US bank bosses, who had already been optimistic in recent months about navigating a falling interest-rate environment and the Federal Reserve’s ability to pull off a soft landing for the economy. That’s all helped push the 24-company KBW Bank Index up almost 41% so far this year.
Basel Watch
Trump’s return to the White House could also mean a win for executives who had been lobbying against the US adopting its latest version of the so-called Basel rules, which would increase the amount of capital they must hold.
The US has already relaxed the planned capital requirements for its biggest banks. But there’s been growing speculation that Trump “may upend the Basel proposal and put the financial sector on a deregulatory path,” Bloomberg Intelligence analysts wrote last month.
What Bloomberg Intelligence Says:
Former President Donald Trump’s reelection likely staves off any capital increases for banks under the rule known as the Basel III Endgame. New regulatory leadership at the Office of the Comptroller of the Currency in 2025 will likely refuse to move forward. We can’t rule out a watered down version of the rule being finalized in 2026 or 2027, but initially, we think work associated with the rule will be paused.
— Nathan Dean & Arnold Kakuda
Trump’s policies could also usher in a revival of dealmaking and capital-markets activity, according to Wells Fargo & Co.’s Mike Mayo. That could help lift lenders’ investment-banking revenue above the highs they last reached in 2021, he said.
“The idea of a capital markets super-cycle seems possible — albeit not a base case — especially given the level of pent-up demand, dry powder and likely more certainty in deals getting approved,” Mayo said, noting Goldman Sachs would be the biggest beneficiary of such a move.
There were some early signs of that on Wednesday, as Ted Smith, the co-founder of Union Square Advisors, said he’d been locked in client calls in the morning.
“They are all over the political spectrum – but to the extent there was a common thread, it’s: I’m glad that’s over, and now let’s get back to work, let’s move forward,” Smith said in an interview. “We thought things were on the upswing and there’s certainly the possibility this will accelerate it.”
Euan Rellie, co-founder of BDA Partners, said cross-border deals face a less certain future, with China and Europe being strong losers from Trump’s tariff plans, while big US private equity firms are set to reap the largest gains.
“The question is how much of the tariff stuff is bombast, how much of it is negotiating ploy?” he said. But in the short term, it’s a clear plus for the US financial sector, he said.
“People are scared of inflation and potential geopolitical chaos, but that is trumped in the short-term by the palpable sense this will be a business-friendly environment,” he said.
Trump will likely replace the heads of the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and the Federal Housing Finance Agency on his first day in office, according to Jaret Seiberg, an analyst at TD Cowen.
The president can fire governors of the Fed board only for cause. That means Democrats will likely maintain control of the Fed until late 2026 and would likely keep a damper on merger activity among banks themselves, Seiberg said.
Trump will have the power to fire CFPB head Rohit Chopra, if he doesn’t resign first, after a US Supreme Court ruling in 2020 made the CFPB director an at-will employee and susceptible to termination for any reason, Bloomberg reported earlier.
‘Nuanced Outcome’
Trump’s victory produces “a nuanced outcome” for European banks, according to analysts at Citigroup.
Barclays Plc, which has a large US presence in both investment banking and credit cards, rose as much as 5.3% in London trading, while the Spanish lender Banco Bilbao Vizcaya Argentaria SA, whose largest market is Mexico, fell as much as 7.1%, the most since April.
Movement in other European bank stocks was also more mixed, as traders weighed the prospect of tariffs with other priorities a future Trump administration might have.
Raiffeisen Bank International AG rose as much as 10.7% — the most in 11 months — helped by Trump’s vow to accelerate an end to Russia’s war in Ukraine. The lender is the biggest foreign bank still operating in Russia, but sanctions prevent it from accessing profits generated by the division.
“A de-escalation scenario has started to price in,” said Gabor Bukta, a Concorde Securities analyst. “Talks between Russia and the US may intensify after President Trump’s reelection and a potential easing in geopolitical tension.”
HSBC Holdings Plc, which counts China as one of its biggest markets, rose 0.4% but lagged behind its peers in the FTSE 350 Banks index.
“We believe this election scenario supports US equities relative to the rest of the world,” analysts at Pictet Wealth Management said in a note to clients. “Beneficiaries from this scenario are likely to be financials and cash-rich companies.”
--With assistance from Bre Bradham, Jan-Henrik Förster, Jonathan Tirone and Matt Turner.
(Updates shares in fourth paragraph, adds comments from executives from eleventh paragraph. An earlier version of this story corrected the name of the investment bank in first deck headline.)
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