Bank de-regulation with or without Congress

Mar. 29, 2017 10:42 AM ETCitigroup Inc. (C)BAC, JPM, GS, C, MS, WFC, BK, STTBy: Stephen Alpher, SA News Editor37 Comments
  • The banking sector has tumbled about 10% this month, with what may be a stalling of the Trump de-regulatory agenda serving as a good enough excuse for satiated bulls to lighten up (the KBW Bank Index remains about 25% higher since the election).
  • Don't give up on de-regulation just yet, writes Aaron Back in the WSJ. The GOP may not have been able to push health reform through Congress, but those outside the legislative branch have ample powers to ease the regulatory burden on their own.
  • One change might be removing the "gold plating" of capital requirements for the largest banks. KBW sees this alone as boosting 2018 EPS by an average of 4.6% for the eight U.S. mega banks. Citigroup (NYSE:C) would be the biggest beneficiary with nearly a 10% increase in earnings. Next in line would be Morgan Stanley (NYSE:MS), Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), Wells Fargo (NYSE:WFC), JPMorgan (NYSE:JPM), State Street (NYSE:STT), and BNY Mellon (NYSE:BK).
  • Next would be a change in the way total leverage is calculated, which currently doesn't count safe assets like Treasurys and deposits at the Fed. This would result in a 13.5% increase in EPS, says KBW, with the two trust lenders - STT and BK - benefitting the most.

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