U.S. banks jump on speculation Trump to soften capital rules

U.S. banks stocks jumped the most since May, led by regional lenders, on speculation a Trump presidency could usher in reforms that ease regulatory burdens on financial-services firms.

Financial stocks paced gains among 11 major industry groups in the S&P 500 Index, and the KBW Bank Index rose as much as 3.8 percent, the largest intraday gain for the 24-company index since May 18. New York Community Bancorp’s 6.3 percent increase was the biggest among regional lenders, and Wells Fargo & Co.’s 4.6 percent advance led the biggest U.S. banks.

“We expect a positive snap-back move once investors digest the results and factor in a more favorable regulatory environment for the financial sector,” Brian Gardner, a Keefe, Bruyette & Woods Inc. analyst, said in a note to clients. Gardner said insurers, brokers and asset managers stand to benefit the most from Donald Trump’s election.

Trump was elected the 45th president of the U.S. on Tuesday on a platform that included repealing the Dodd-Frank Act’s strict capital requirements on banks and a proposed temporary moratorium on new financial regulations. Congressional critics of the 2010 legislation have said they would scrap the Volcker Rule, which restricts banks with taxpayer-backed deposits from making proprietary trades; reshape the Consumer Financial Protection Bureau; and let banks effectively escape Dodd-Frank if they raise large amounts of additional capital as cushioning for bad times.

Looser rules

“Donald Trump has advocated in favor of loosened regulations,” Virginie O’Shea, a financial analyst at Aite Group LLC, said in a statement. Trump might “loosen certain regulations in the longer term, such as capital requirements for financial institutions, or maybe eliminate a few specific lines from Dodd-Frank. Although Dodd-Frank is almost implemented, a few areas are still in progress. In the short term, expect the brakes to be put on requirements that are yet to come into force.”

Navient Corp., which collects student loans on behalf of the government, rose 17 percent to $15.73 at 11:43 a.m. in New York, a record intraday gain for the stock and the best performer in the S&P 500 Index. Private student lenders and other for-profit education firms stand to benefit from Trump’s education policies, according to  Isaac Boltansky, an analyst at Compass Point Research & Trading LLC.

Life insurer stocks rallied Wednesday followin the election of Donald Trump as the 45th U.S. president. (AP Photo/ Evan Vucci)

“Trump has made comments suggesting his preference for banks to take a larger role in higher education lending,” Boltansky said. “A President-elect Trump should be viewed as a broad positive for the education-services space.”

Life insurers also rallied Wednesday, with Primerica Inc. climbing as much as 13 percent, the most since April 2010. The companies were helped by higher bond yields and speculation that Trump’s victory might lead the government to ease some regulation on the sale of retirement products.

“Among the biggest positives is the potential for scaling back regulatory reform,”  John Nadel, an analyst at Credit Suisse Group AG analyst, said Wednesday in a note.