When Goldman Sachs (A) CEO David Solomon received an invitation to watch Donald Trump triumphantly ring the opening bell at the New York Stock Exchange earlier this month, and there was no doubt he would go.
Not only was the next US president coming to Wall Street, he was giving Solomon and Citigroup (C) CEO Jane Fraser, and a group of other corporate executives have the opportunity to meet and mingle with a group of Cabinet candidates on the trading floor.
Minutes before Trump’s bell rang, the crowd chanted: “USA.”
Solomon and other big bank bosses certainly have a lot to cheer about as 2024 draws to a close.
President-elect Donald Trump rings the opening bell on the trading floor of the New York Stock Exchange on December 12. (Photo by Spencer Platt/Getty Images) ·Spencer Platt via Getty Images
Deal making and trade are on the rise, interest rates are much lower than they were a year ago, and the prospect of looser banking rules seems possible with a new Republican administration on the verge of taking over the White House. Rewards It is also expected to arrive Once the checks are cut in the new year.
No bank is better positioned to benefit from this shift than Goldman, which relies heavily on Wall Street-centric investment banking, trading and wealth management businesses. Its shares have soared since Trump’s election, and over the past 12 months they are up 50%.
But it’s not the only bank to rise. Since the election, JPMorgan Chase shares have risen (JBM(and Bank of America)Buck), Citigroup, Wells Fargo (WFC), and Morgan Stanley (Ms) by a rate ranging between 5% and 12% until Friday.
David Solomon, CEO of Goldman Sachs, speaks during the Reuters Next conference on December 10. Reuters/Mike Segar ·Reuters/Reuters
“A lot of bankers, it’s like dancing in the street,” JPMorgan Chase CEO Jamie Dimon said days after Trump won the election.
JPMorgan, the country’s largest bank, was among the banks that had a banner year. Analysts expect the bank to break another record for the highest profits in the history of American banks. Investment banking revenues are expected to rise 45% in the fourth quarter.
Some expect 2025 to be a repeat of 1995, when bank stocks soared after interest rate cuts by the Federal Reserve, a soft landing engineered by then-central bank Chairman Alan Greenspan and a deregulation stance taken by then-President Bill Clinton.
A federal law signed by Clinton in 1994 eliminated restrictions that prevented banks from opening branches across state lines, paving the way for a period of consolidation that would eventually give rise to coast-to-coast empires assembled by JPMorgan Chase, Wells Fargo, and Bank of… Of America. America and Citigroup.
In 1995, an index tracking the banking sector finished up more than 40%, outperforming the Standard & Poor’s 500. (GSCP). This outperformance will continue for another two years.
The current year rivals 1995 in terms of the abundance of investors. KBW Bank Index (^ BKX) so far is up 32%, outperforming major stock indexes.
To keep the party going, “election optimism must translate into banking revenue,” Barclays analyst Jason Goldberg told Yahoo Finance.
“The market is pricing in a further rebound, so that’s certainly something to take into account,” he added.
One hopeful sign is that investment banking is up this year, ending a two-year drought.
Investment banking revenues in 2024 are expected to be the third highest in the past decade, according to Dealogic data as of December 17.
Activity levels remain slightly below the 10-year historical average, which includes the breakout year in 2021, but Solomon expects this to change next year with more deals in the works and an easier M&A approval process in Washington.
“In 2025, we will definitely be at the 10-year averages,” Solomon told a Reuters conference this month. “Maybe we will be ahead of the 10-year averages.”
The biggest prize for the banks will be for the next Republican administration to resort to attacking the supervisors of the major banks, as well as their rules and regulations.
Bank CEOs testify during a US Senate Banking Committee hearing in 2023. REUTERS/Evelyn Hochstein ·Reuters/Reuters
The requirements are based on an international set of capital requirements known as Basel III that were imposed in the decade following the 2008 financial crisis.
Banks have been resisting this US proposal over the past year in an aggressive public campaign, and have even dropped hints about suing regulators if they don’t get their way.
They scored a major victory in September when some regulators said they would relax those requirements.
Bankers expect the new administration to reconsider the rules again. Barclays’ Goldberg added that if the position of the previous Trump administration is any guide, the new round of capital increases could range from the current 9% to “no increases.”
There are still plenty of uncertainties that could upend bank stocks. Some economists worry that Trump’s broader economic agenda of raising tariffs, cutting taxes and deporting illegal immigrants could increase inflationary pressures and keep interest rates high.
This, in turn, can make life more difficult for bank borrowers and increase financing costs for lenders.
But bank investors like their prospects. As do bankers.
Bank of America CEO Brian Moynihan He told Yahoo Finance Last month in invest He expressed his confidence in the American economy under Trump’s leadership and expected the administration to “start strong.”
David Hollerith is a senior reporter at Yahoo Finance covering banking, cryptocurrency, and other areas of finance.
