By Rebecca Ungarino

Shares of the largest U.S. banks and regional lenders soared across the board on Wednesday as investors pinned their hopes on the likelihood that former President Donald Trump, who is projected to win the presidential election, will significantly weaken financial regulations.

"The Trump victory will usher in the largest change in federal financial regulators in the history of the U.S.," analysts at Raymond James led by Ed Mills wrote in a report on Wednesday. "The only federal financial regulators that will remain is the leadership at the Federal Reserve."

Exchange-traded funds tracking banks jumped the most since November 2020. The Financial Select Sector SPDR Fund, the widely followed fund that holds banks, payment companies, private-equity firms, and insurance companies, was on pace to hit a record high.

Here were the moves on Wednesday:

   -- Shares of JPMorgan Chase, the biggest U.S. lender, which is often seen as 
      a bellwether for the industry, jumped 8% to a record. 
   -- Bank of America, Citigroup, and Wells Fargo respectively surged 5%, 8%, 
      and 11%, while investment banks Goldman Sachs and Morgan Stanley rose 11% 
      and 9%. Goldman, Morgan Stanley, and Wells Fargo hit records. 
   -- Blackstone, the largest private-equity firm, rose 4% to a record high. 
   -- Regional banks such as Huntington Bancshares and Regions Financial were 
      soaring. The SPDR S&P Regional Banking ETF, which tracks the industry, 
      was up 7%. 

The moves reflected investors' belief that a second Trump administration will take a far softer approach to supervising banks than the Biden administration, giving banks more leeway in their activities and boosting profits. Republicans have also won control of the Senate, giving the party even more firepower in Washington, while the House of Representatives was projected as too close to call on Wednesday morning.

At stake for the sector are key regulations including those governing how much capital large banks must hold on their balance sheets -- a framework that banks have pushed back on fiercely -- and rules around charging so-called junk fees that banks have been fighting to hold on to.

Mergers and acquisitions are expected to find a much easier backdrop under Trump. That goes for tie-ups among banks, especially small ones, as well as general merger activity that rewards investment bankers.

"Trump win is a regulatory game changer that likely includes more free markets, less harsh oversight (aids capital, costs, fees), and reduces 'regulatory risk,'" Wells Fargo analyst Mike Mayo wrote in a report. It marks a "new era" after 15 years of tougher regulation, he said.

Mayo said a second Trump administration should "aid all banks," especially the largest among them -- and notably Citigroup. The bank would benefit from less stringent oversight. It is seeking to satisfy regulators that it is complying with consent orders addressing past violations as it moves ahead with a yearslong turnaround effort.

Industry leaders started to coalesce around Trump on Wednesday.

Rob Nichols, the chief executive of the American Bankers Association, said in a statement that his group and member banks "look forward to working with the Trump-Vance administration and members of Congress in both parties to advance commonsense policies" that support economic growth and banks.

Rebeca Romero Rainey, chief executive of the Independent Community Bankers of America, said her organization and its bankers "congratulate the winners of last night's elections and look forward to working with them on the key policy issues affecting community banks and the communities they serve."

Write to Rebecca Ungarino at rebecca.ungarino@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

November 06, 2024 11:25 ET (16:25 GMT)

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