Why Bank of America, Visa and Capital One are clamoring for a Trump victory

On November 7, 2024By Littum

Bank stocks rose after several publications and major television networks declared Donald Trump the winner of the election and the future 47th President of the United States. The SPDR S&P Regional Banking exchange-traded fund traded nearly 11% higher at 10:45 a.m. ET, the biggest single-day move I can remember while covering bank stocks.

Shares in the country’s second largest bank, Bank of America (NYSE: BAC)traded almost 7% higher. Meanwhile, stocks are off Visa (NYSE: V) traded nearly 4% higher, while shares on The capital (NYSE: COF) had exploded nearly 20% at one point this morning before paring some of those gains.

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I wrote last week that bank stocks would be one of the big benefits of a Trump victory. While not exactly a campaign issue for either party, bank regulators under the Biden administration have been tough on bank stocks. They have delayed approval times for mergers and acquisitions, and proposals for tighter capital and liquidity regulations have loomed over the sector for some time. Trump introduced deregulation to the sector in his first term as president. The Republicans also flipped the Senate and were able to take control of the US House of Representatives.

“Donald Trump is the candidate where you ignore what he says and focus on what you expect him to do,” TD Cowen analyst Jaret Seiberg wrote in a recent research note, according to CNBC. “That’s why he’s making the promise of deregulation for the financial sector, as his regulators are likely to roll back much of the CFPB (Consumer Financial Protection Bureau) enforcement agenda and rethink safety and soundness changes for big banks.”

Trump will also be able to appoint a new US attorney general and new officials at the US Department of Justice (DOJ), which could greatly benefit companies such as Visa and Capital One. The DOJ under Biden has pursued several antitrust cases against large companies in several sectors. It recently sued Visa over its payment card practices, claiming the company used unfair powers to charge transaction fees it couldn’t have in a competitive market. The New York Attorney General’s office also recently launched an investigation into Capital One’s planned merger with Discover financial services and whether it violates state antitrust laws.

It’s still early, and I don’t think anyone knows for sure how Trump will approach antitrust cases. However, with the likes of Elon Musk and JD Vance expected to have strong influence in the Trump administration, I find it unlikely that a Trump DOJ would be as aggressive with antitrust as the DOJ under Biden.

Until recently, banks have been struggling for the past few years. The sector dealt with an inverted yield curve, where the yield on short-term government bonds exceeded the yield on long-term government bonds. This is bad for banks, which generally lend short and long loans. Now the yield curve is steepening, which generally benefits the banks. Lower interest rates should also help reduce deposit costs and accelerate investment banking activity.

Banks are also likely to have much clearer visibility into the final capital rules, which will allow them to speed up share buybacks and be able to move ahead with mergers and acquisitions, a catalyst for the sector. All of these reasons lead me to believe that bank stocks are a buy right now.

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Discover Financial Services is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Bram Berkowitz holds positions in Bank of America. The Motley Fool has positions in and recommends Bank of America and Visa. The Motley Fool recommends Discover Financial Services. The Motley Fool has one disclosure policy.

Why Bank of America, Visa and Capital One are clamoring for a Trump victory was originally published by The Motley Fool