U.S. Banks: Probable Winners, Potential Losers

Financial Metrics

While it’s too soon to tell what the ultimate impact to the U.S. banks from a second Trump presidency will look like—we reiterate our view of “banking risk as more downstream from policy”—in the immediate term we sketch out the likely winners and potential losers on general directionality and consensus priorities, e.g. a more industry-friendly stance from regulators and corporate tax cuts. Downside risks on the other hand are more nebulous, wholly dependent on specific policy prescriptions and the second- and third-order impacts to the broader macro environment; e.g. even if banks are tangible ‘winners’ on a corporate tax cut, there’s risk in the deficit/interest rate implications (same idea with tariffs and the associated inflationary impulse).

For the purposes of this initial piece, we are leaning on deregulation and a general industry-friendly posture to highlight election winners, which largely mirrors the market reaction last week though we also pour some cold water on some of the exuberant narratives (we’re more circumspect on bank M&A for example). Conversely, the election ‘losers’ are more about highlighting what we see as larger downside risks from potential policies than an immediate threat; those downside risks will clarify as the new Trump administration comes into power, but are worth starting to consider in the interim (especially with valuations as tight as they are).