When interest rates are high, the largest banks of Wall Street win. Under the next president, with less stringency on the financial sector, they can also extend those gains even with lower rates.
Despite the market’s worried signals about tariffs and other inflationary fears related to Trump’s future presidency, the big banks, with their record profits, sent a different, optimistic message this week, highlighting huge profits and promising prospects. facing a future that promises a change in policies and a pro-growth agenda promoted by the incoming president.
What the banks’ spectacular results hinted at on Wednesday It was not just the long-awaited desire for regime change in Washingtonbut also the continuation of a post-COVID boom.
JP Morgan, the largest bank, posted more profits in 2024 than at any other time. Its annual profit of US$58 billion It is the highest in the history of American banking. The annual profits of Goldman Sachs increased 68% to $14.2 billion, with fourth-quarter profits more than doubling compared to last year. Wells Fargo It also closed the year strongly, reporting quarterly profits of $5.08 billion, compared to $3.5 billion a year earlier.
However, while banking executives believe a Trump White House will be more favorable, they also did quite well during the Biden years.. But they are convinced that they are on the verge of achieving something even greater.
Although even Trump allies have expressed concerns about where tariff threats and promises of immigration reform will lead to the economy and, specifically, inflation, a second round of deregulation and business-friendly appointments under Trump is expected be a benefit for the banks.
What the market analyzes
“Businesses are more optimistic about the economy and are encouraged by expectations of a more pro-growth agenda and better collaboration between government and business,” he said Wednesday. Jamie DimonCEO of JP Morgan. Mergers and acquisitions are experiencing a resurgence after a period of freeze, and there is potential for a boom on the horizon.
Industry executives hope that a more flexible regulatory environment will make corporate mergers easier. Additionally, Trump is expected to soften or eliminate a set of proposed capital rules that would have reduced the sector’s profits.
Of course, banks will still have to deal with the consequences of increased government spending and tax cuts if Trump manages to implement his plans. But, at least for now, The fight against inflation seems to be making progress. Wednesday’s encouraging reading suggested the Federal Reserve may be in the sweet spot, not needing to adjust interest rates to continue moderating price pressures.
Banks can make a lot of money on high rates, as lending margins have been boosted by the Fed’s campaign. But They can also make big profits in lower rate environmentsby leveraging other business operations to fill gaps in revenue. For big banks, a “high rates for longer” scenario under an eventual final Trump term is a recipe for growth. But it’s not the only one.
Source: Ambito
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