Chicago, IL – November 8, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: JPMorgan JPM, Goldman GS, Citigroup C. First Horizon FHN and KeyCorp KEY.
Here are highlights from Thursday’s Analyst Blog:
Donald Trump's win in the U.S. presidential election is seen as a positive sign for the financial sector, particularly for banks.
Hence, bank stocks surged on Wednesday. The KBW Nasdaq Bank index and the S&P 500 Banks (Industry Group) index popped 10.7% each and the KBW Nasdaq Regional Banking index was up 13.5%.
If we look at individual bank stocks, big names like JPMorgan, Bank of America, Wells Fargo, Goldman and Citigroup jumped between 8% and 14%. Regional lenders were not far behind, and many surged more than 15%, including First Horizon, KeyCorp and Zions Bancorporation.
Bank stocks are having a banner year thanks to the economic resilience even during the high-interest rate regime and a solid rebound in capital markets business. Trump's re-election has raised hope of a better 2025 as well.
The KBW Nasdaq Regional Banking Index is up 21.5% and the KBW Nasdaq Bank index has gained 39.2% this year. The S&P 500 index has rallied 24.8%. The above-mentioned bank stocks have significantly outperformed the broader market and the Zacks Finance sector.
Lesser Regulations Related to Consumer Fees: Banks are set to benefit from the easing regulatory landscape. The Trump administration is likely to make leadership changes in several federal regulatory agencies that supervise banks or other financial services giants. Currently, the Consumer Financial Protection Bureau oversees banks' consumer fee income and intends to impose stringent rules as to how much banks can charge for services.
With the new administration in place, banks, including JPM, C, KEY and FHN, expect looser regulations. This will enable them to earn higher fee income and support the top line, which has been reeling under pressure from volatile spread income.
Less Antitrust Regulation: The Trump administration is likely to be friendlier toward corporate mergers as the easing of some rules for big banks and more leniency in approving merger deals are expected. This will likely lead to a strong investment banking (IB) performance, with big names like JPM, GS and Bank of America gaining from it. The IB business had been witnessing weakness since 2022 and revived this year on the back of clarity on several macroeconomic factors. Hence, with less antitrust regulation in place, industry players are likely to record solid gains.
Lower Capital Constrain: Since the 2008 financial crisis, large banks like JPMorgan, Bank of America, Citigroup and Goldman have been required to hold more capital to safeguard them in the event of similar occurrences. In July 2023, the U.S. banking regulators planned to overhaul the global capital requirement known as the Basel Endgame to boost requirements for the world's largest banks by nearly 19%.
Though in September 2024, the requirements were toned down, banks were still likely to maintain an additional 9% capital as buffers for future losses. Now, with the Trump administration being more in favor of deregulation, the banking industry is hoping for further toning down or scrapping of these extra requirements.
As the incoming Trump administration is in favor of deregulations, banks are likely to be winners. Also, the Federal Reserve is lowering interest rates, which is expected to support banks' net interest income (NII) growth as funding costs come down.
Nonetheless, with all expected economic changes, the extent of the central bank's willingness to cut the rates remains to be seen. During the September FOMC meeting, Fed officials signaled four rate cuts for 2025. Now, investors must watch for Fed Chairman Jerome Powell's speech after the two-day meeting later today.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
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$Citigroup Inc(C-N)$. (C) : Free Stock Analysis Report
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First Horizon Corporation (FHN) : Free Stock Analysis Report
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