Bank Brass Expect Trump Deregulatory Agenda To 'Strengthen Customer Activity': Analyst

Wall Street banks are unfazed by the administration’s tariff policy and are hopeful that the White House’s legislative agenda will benefit them, according to Bank of America analyst Ebrahim H. Poonawala.

The Banking Analyst: In a note published Thursday, Poonawala noted how optimistic Wall Street banks were at the recent Bank of America financial services conference.

Main Takeaways: Executives from over 30 banks seemed to agree that looser regulations will lead to financial teams having more time to pursue growth opportunities rather than deal with compliance.

“Our takeaway based on meetings with 30+ Wall Street/Main Street banks during BofA’s 33rd annual financial services conference was that despite the recent tariff headlines, there remains continued optimism that a pro-business Trump administration (on taxes, regulations) should drive strengthening customer activity,” the analyst said.

The analyst mentioned yield curve spreads rather than treasury futures as the more important metric to estimate future bank performance.

“While bank stocks appear to sell off on rising US Treasury yields, our conversations with mgmt teams support our view that a steeper yield curve should be a net positive for net interest income growth and net interest margins. Deposit pricing competition remains subdued with a pick-up in loan growth seen as a potential catalyst that could change this dynamic,” the analyst said.

Poonawala noted that “receptivity” toward Goldman Sachs Group Inc GS and Morgan Stanley MS due to the companies’ integrated business models.

Regional banks, as reflected by the SPDR S&P Regional Banking ETF KRE, should also benefit, the analyst says. However, regionals will likely need a catalyst to boost current valuations.

Poonawala, in his note, did not mention the Trump administration’s recent shut-down of the Consumer Financial Protection Bureau (CFPB). The agency was formed in the aftermath of the 2008 financial crisis as a necessary watchdog to keep financial institutions in check — much to the dismay of top bank CEOs.

Over the years, the CFPB has recovered over $17.5 billion for bank consumers affected by fraudulent or predatory practices. It has also established rules to limit overdraft fees and reduce credit card late fees, aiming to protect consumers from excessive charges.

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