If there is one sector of the stock market that has been damaged most by burdensome regulation and ultra-loose monetary policy over the last decade it is the Financial sector. Here the WSJ outlines the potential for the six biggest U.S. banks to return more than $100 billion to investors if Trump succeeds in a push to loosen bank regulation.
The six biggest U.S. banks could potentially return more than $100 billion in capital to investors over time through dividends and share buybacks if the Trump administration succeeds in a push to loosen bank regulation.
President Donald Trump on Friday signed a memorandum ordering a review of the Dodd-Frank Act, the postfinancial-crisis regulatory overhaul that has guided regulators such as the Federal Reserve. The aim is “cutting a lot out” of those rules, Mr. Trump said in a meeting at the White House.
That caused bank stocks to gain ground Friday, building on sharp increases since the presidential election. Those occurred as expectations among investors of higher interest rates, less regulation and stronger economic growth stoked optimism that banks will be able to return more capital to shareholders. While there is no guarantee the banks will do so when they are able, they have been eager in recent years to return capital as their profits have grown and their balance sheets have become less risky.
The top six U.S. banks have $101.57 billion in capital in excess of what regulators require them to set aside, according to research from RBC Capital Markets. Analysts at Morgan Stanley estimate such capital at around $120 billion across 18 of the largest banks.
Read more here.
Jeremy Jones, CFA
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