Trump and Wells Fargo
President-elect Donald Trump is a strong proponent of relaxing regulatory burdens in the financial sector. Large banks with outstanding litigations would benefit from relaxed regulations, likely seeing lower expenses, balance sheet growth, and increased capital.
Trump also plans to boost infrastructure spending, which could result in a steepening yield curve, benefiting banks’ (BAC) margins.
“There is this belief that the regulatory process is going to become much less onerous under Trump,” said Charles Peabody, a Compass Point Research & Trading analyst. He continued, “Since a lot of the problems at Wells Fargo were regulatory-induced, there is hope for some relief on that front.”
“We think the main result of Donald Trump’s election will be that Trump will be able to appoint regulators who are more industry friendly than regulators appointed by President Obama,” Brian Gardner, head of Washington research at Keefe, Bruyette & Woods, wrote in a note last week. Wells Fargo’s (WFC) Wealth Management business is also expected to benefit from Trump’s tax cuts. Investors expect a Trump presidency to be friendly to the financial sector (XLF).
Shares of Wells Fargo have jumped 16% since the results of the US election, erasing the losses it incurred due to its fake accounts scandal. The Consumer Financial Protection Bureau (or CFPB) slapped Wells Fargo with a $185 million fine after its employees opened more than 2 million fake accounts. Its former CEO, John Stump, was forced to resign following the scandal, and the bank lost its status as the most valuable bank to JPMorgan Chase.