U.S. bank stocks have seen their share values rise since the 
November 8th election which could also impact the stock price performances of financial institutions north of the border, such as Royal Bank of Canada. Here’s why the banking sector could benefit big time under a Donald Trump Presidency.
By SmallCapPower.com
What Trump’s Presidency Could Mean For U.S. Banks
Perhaps the most significant impact could come from Mr. Trump’s pledge to rollback the Dodd-Frank Wall Street Reform and Consumer Protection Act, a large piece of financial reform legislation passed by the Obama administration in 2010 as a response to the financial crisis of 2008. This would likely also receive support from the Republican-controlled Congress.
Higher reserve requirements under Dodd-Frank mean banks must hold a higher percentage of their assets in cash, and critics have argued that resources required in maintaining regulatory compliance could harm the competitiveness of U.S. firms in the global marketplace.
In general, a Trump Presidency should lead to higher rates of inflation, higher interest rates, and an improvement in America’s economic strength.
- Higher interest rates would translate into larger profit margins for banks,
- and greater inflation levels should lead to higher loan amounts.
- Even the recent market volatility as a result of the uncertainty surrounding Mr. Trump’s policies is expected to benefit banks by boosting trading revenues from fixed income, currency, and commodities.
- Finally, a reduction in the overall corporate tax rate, which he has pledged will drop from 35% to 15%, would not only boost the banks’ profitability but would also spur investment from its corporate clients that would likely involve greater levels of borrowing, especially if Mr. Trump makes good on his promise of increased infrastructure spending. In fact, he is expected to offer $137 billion in tax credits to private construction companies undertaking infrastructure projects according to Zacks.
